Cartels

Market Sharing

Cartels and market-sharing arrangements constitute one of the most serious breaches of competition law.  Cartels may involve blatant and explicit conspiracies to set prices or share markets.

More commonly, cartels operate informally, and of their nature, they are undocumented. They may be difficult to prove.

Cartels typically operate in markets with relatively few participants.  There may be a duopoly or oligopoly.  However, cartels may also operate where there are many market participants through trade rules.  They may operate under the guise of trade associations and joint ventures.

Cartels

In exceptional cases, cartels may promote efficiency by combined effort. Exceptionally, a cartel may be justified in a crisis in a particular industry.  When an industry is in severe distress, what would otherwise be prohibited as a cartel may be permissible.

The European Commission has imposed very high fines on cartels.  Cartel members have been made individually responsible. They are strongly opposed by competition authorities and attract the heaviest sanctions.

Cartels may fix prices or limit output.  They may involve limitations on development or investment A cartel may seek to carve up markets geographically.  EU law is strongly opposed to agreements which seek to divide the common market.

A quota cartel involves agreements to limit production.  The limitation of production will typically increase profits above normal profit levels for the participants, to the detriment of consumers.

Trade Bodies I

Trade Association’s rules, regulations, practices, and recommendations may infringe on competition law. By their nature, many trade associations undertake activities which potentially restrain or are restrictive of trade.

Many trades and professions, either by law or by practice, may not be carried on other than by members of a particular trade association or body.   They may regulate entry into a particular trade or profession.  They may set standards.

Trade Associations may collect and disseminate statistical information.  They may regulate activities in the trade. They may undertake joint promotions and organise exhibitions and fairs.  They may undertake research and development.  They may advise and train members.  They typically provide a forum for the exchange of views between members of the profession or business.

It is legitimate for professions and traders to form associations and undertake activities for their collective benefit.  Most such activities will not be anti-competitive.  Some activities which are anti-competitive, may be capable of being justified in the public interest.  However, in some cases and sectors, trade associations have been highly restrictive of competition in the interests of their members without any basis which is justifiable in the public interest.

Under the earlier competition legislation (where the key prohibitions were in identical terms), the Competition Authority considered the rules of a number of trade bodies and published criteria as to compliance with competition law.  Conditions for admission into a trade association must be fair, objective, necessary and legitimate.  The qualifications for entry must be necessary and essential.  The ongoing conditions of memberships must be reasonable and based on objective criteria.

Self-regulating bodies are particularly well-positioned to restrict the number of entrants.  The Fair Trade Commission and the later Competition Authority inquiries into the professions were critical of practices of restricting the number of entrants.  This was likely of itself to constitute a restrictive practice and/or to be an abuse of a dominant position.

Trade Bodies II

Trade bodies and associations which provide arbitrary conditions and practices regarding entry to the trade or profession are likely to be in breach of competition law.  Associations that require the approval of existing members or a number of them are likely to be invalid.  Requirements that members be of a particular nationality is likely to be discriminatory and impermissible.

Financial requirements to have particular facilities, premises, equipment, insurance etc. are likely to be valid, provided that they are reasonably tailored to a relevant objective requirement.  The exchange of information in trade associations is generally permissible.

Trade journals and circulars are typical.  Care must be taken to ensure that they are not a forum for price fixing, fixing of terms and conditions of business or other anticompetitive activity. The trade journal should be made available on a non-discriminatory basis.

The exchange of price information, published pricing structures and recommended pricing are likely to breach competition law. The fixing of the terms of trade will often breach completion law.

Standardised Terms

The non-discriminatory standardisation of products and terms of supply, which is not exclusionary, may be permissible.   Certification and labelling may be permissible, provided that the standards are objective, reasonable and non-discriminatory.

Handbooks, codes of conduct and rules may potentially contain anti-competitive provisions.  They are potentially rendered void as anti-competitive and/or an abuse of dominant position.

The division of markets by trading association is likely to constitute an anti-competitive practice.

The misuse of collective power, including a boycott or limitation applied to dealings with third parties, is likely to be anti-competitive.

Joint Marketing

Joint advertising campaigns may be permissible, provided that they do not involve pricing. Rules and codes which prohibit and restrict advertising will generally be anti-competitive.

It may be legitimate to put restrictions on the terms and content of advertisements.  The Competition Authority has taken to view that advertising and price competition is necessary and desirable in the public interest.

Requirements that advertisements must not be misleading, untruthful or likely to bring a profession into dispute will normally be acceptable.  Certain types of selling and unsolicited contact calling may be prohibited by the rules.

Trade fairs are permissible in principle.  In principle, they should be open wide. Space limitations may justify a limit on numbers.  Exclusionary and discriminatory arrangements are likely to be anti-competitive.