On 28 November 2017, the European Commissioner for Competition, Margrethe Vestager, stated that “the auto industry is a high priority”. The comment was made in connection with the suspected collusion between German car makers which the European Commission is currently investigating.

It is alleged that VW, Daimler and BMW met starting in the 1990s to coordinate activities related to vehicle technology, costs, suppliers and strategy as well as diesel emission controls. The European Commission’s investigation was originally started following self-reports from Daimler and Volkswagen and has involved unannounced inspections at Daimler’s and Volkswagen’s premises.

Can this happen in Ireland?

The Competition and Consumer Protection Commission (CCPC) in Ireland has investigated unlawful conduct by trade associations on a number of occasions. The CCPC has also brought successful criminal court cases against members of a cartel, including in the car sector. For example, eight individual and six companies were convicted for participating in a price fixing cartel through the Citroën Dealers Association and a Ford dealer was convicted of aiding and abetting a cartel within the Irish Ford Dealers Association.

Why did Daimler and Volkwagen self-report their conduct to the European Commission?

The European Commission has a leniency programme which allows companies who have participated in illegal cartels to provide information about the cartel in order to avoid (or receive reduced) fines. These leniency programmes are mechanisms to help uncover cartels and provide witnesses for the criminal prosecution of cartel members. In Ireland, the CCPC and the Director of Public Prosecutions (DPP) have jointly issued a cartel immunity programme (Programme). The Programme means that a member of a cartel may avoid prosecution, and immunity from fines, if they come forward and reveal their involvement in illegal cartel activity before the CCPC has completed any investigation and referred the matter to the DPP. In Ireland, only the first member of a cartel that satisfies the requirements of the Programme will benefit from immunity.

What are the potential penalties for breach of the competition rules?

The risks for trade associations, its member companies and individuals are considerable as they can all be liable for breaches of competition law. An individual involved in a cartel in Ireland faces a prison sentence of up to ten years and potential fines of up to €5 million while a company faces fines of up to 10% of annual global turnover. There is also an automatic disqualification of directors on conviction on indictment which precludes them from acting as directors of a company for up to five years.

While the CCPC, unlike the European Commission, does not itself have the power to impose fines, it can apply to the court to compel parties to stop their illegal activity or to ask the court to impose fines and other sanctions.

What are the rules surrounding discussions with competitors?

EU and Irish competition law prohibits businesses from entering into anti-competitive agreements or concerted practices with others. This covers not only formal agreements but also any sort of informal arrangement or discussion between businesses, whether written or verbal, which has an anti-competitive object or effect. Trade association are often used as a conduit for anti-competitive behaviour and can facilitate exchanges of information between competitors.

Competition law requires competitors to act strictly independently of each other in the market. Sharing competitively sensitive information (whether directly or indirectly through a third party) causes concerns under competition law as exchanges of commercially sensitive information can facilitate collusion between companies, thus enabling those companies to engage in cartel activities such as price fixing, market sharing, limiting output and bid rigging. An information exchange can also fall foul of competition law if it increases market transparency to such a degree that companies are aware of their competitors’ future intended behaviour on the market. This may reduce their incentives to compete and lead to competition on the market being prevented, restricted or distorted.

Of particular note is the recent case of Balmoral Tanks v Competition and Markets Authority where the Competition Appeal Tribunal in the UK (CAT) fined Balmoral Tanks €130,000 for discussing prices with competitors. It held that a single meeting between competitors can amount to an infringement of competition law, even if the intention of the meeting was not to exchange sensitive information. The CAT held that the discussion of prices at the meeting amounted to a breach of competition law despite Balmoral Tanks claiming that the information they had provided was not specific and that it had continued to compete with the other two participants aggressively. The CAT also held that the fact that suppliers could receive similar information on competitor pricing from customers did not mean that the pricing information was not sensitive as the meeting provided an opportunity to have that information confirmed directly by the competitors.

So, what can (and can’t) you talk about with competitors?

Some exchanges of information are entirely legitimate, for example a discussion of general health and safety or environmental concerns. However, a discussion relating to the adoption of a company’s specific technological solution may amount to a breach of competition law. Whether an information exchange has the potential to prevent, restrict or distort competition depends on the nature of the information being exchanged, how the information is shared and the characteristics of the relevant market.

The CCPC has clarified that it considers the following types of information to be commercially sensitive in most circumstances and that it must not be shared between competitors:

  1. Current and future pricing information (for example, actual prices, discounts and rebates)
  2. Current and future output and sales information (for example, volumes, turnovers and market shares)
  3. Current and future commercial plans (including, product development, marketing and promotional plans)
  4. Information about costs
  5. Customer lists

The list is not exhaustive and other types of information can be commercially sensitive.

Lessons for businesses

The recent investigation by the European Commission and the judgment of the CAT show that it is now more important than ever for companies and individuals to be aware of their obligations under competition law. Companies should ensure that their employees are well trained on what can and cannot be discussed with competitors, particularly those employees who regularly attend meetings or events with competitors.