Arrangements to rig bids in public procurement competitions are regarded as serious breaches of competition law. The rigging may take different forms. It may involve a chosen winning tender in advance, with other members submitting false bids.
Different tenders may attempt to “win” bids in succession. The bid rigging might, in effect, constitute price-fixing and division of the market on an allocated basis.
Bid rigging may take the form of withdrawals of bids. Certain rigging may comprise agreements by one bidder to be awarded a subcontract in return for not bidding or for submitting a bid that is known to be too high.
The exchange of certain sensitive market information from or between competitors is likely to breach competition law. It can be enough that the information is transmitted in one direction. There is likely to be a violation of competition law where the information is strategic or price-sensitive and is not the kind of information which would generally be willingly shared.
Any exchange of information regarding price or intended future price or production details is likely to be a breach. The exchange of information, which makes it easier for competitors to predict each other’s behaviour, accordingly increasing the risk of anticompetitive consequences, is likely to be prohibited.
The nature of the market is relevant. The more concentrated it is, wither a small number of key players, the more likely the exchange of information is to be considered anti-competitive. Information exchange between businesses, who collectively hold the majority of the market, is scrutinised more closely for anticompetitive effects.
Not all exchange of business information necessarily breaches competition law. Much information which is published allows consumers to make better and more informed decisions. Benchmarking in an industry, by which businesses measure their performance against best industry practices is likely to be in the interests of consumers. The compilation of statistics on the market over time will usually be helpful and legitimate.
Generalised data from the industry is much less likely to be problematic than data relating to a particular entity. The fact that the information could have been obtained from another source does not prevent its exchange from being anti-competitive, particularly if and/or other relevant information is not readily available.
It is usually legitimate for a business to find out about its competitors’ prices in the normal course of its business. This may include finding it out from its own customers, who are also customers of the competitor. However, if the customer is used as a mere intermediary in transferring price information, there may be a breach. Where parties are directors of competitors, their anticompetitive arrangements may be inferred from certain types of contact.
Joint purchasing agreements may bring efficiencies that may be justified under competition law. They may lead to economies of scale and bring benefits to consumers. A fair share of the benefits of the agreement must be passed on to consumers.
In some cases, joint purchasing may be permissible, even on the part of competitors. It may enable them to obtain better terms and conditions than they would have procured individually.
Where the parties are not competitors at lower levels in the market, there is generally no anticompetitive effect at all. If, however, the arrangement is, in substance, a cartel or price-fixing arrangement, then it will be prohibited. Where the combined share of the market is less than 15% of the relevant market, they are unlikely to be anti-competitive effect.
Restrictions such as minimum purchase requirements should not go, extend beyond what is necessary for the joint purchasing arrangement to work. If the joint purchasers have market power as purchasers, there is a risk that the joint purchasing agreement will be itself anti-competitive. If the joint purchasing parties have a significant market presence, then they may be able to justify the arrangement under a block exemption.
The greater the market power which the joint purchasers have at lower levels, the greater the risk they will coordinate behaviour to the detriment of parties lower down the distribution chain, including in particular, consumers. It is relevant to whether parties are free to obtain supplies outside of the arrangements.
Restrictive practices and obligations to purchase within the arrangement are relevant. They must be no more than is necessary to ensure that the arrangements function. The strength of the supplier relative to the purchasers will be of importance. It will also be relevant whether the purchase from the supplier foreclose supplies to other competitors.
Joint selling agreements involving the fixing of prices are generally prohibited as anti-competitive. Where the agreement involves allocating markets or fixing prices, it is likely to be a clear breach of competition law.
Similarly, where markets are partitioned, there is likely to be a breach. This may also arise if there is a tacit understanding. Information on the nature of the market may be objectively necessary to determine if the arrangements breach competition law.
Joint selling agreements may bring increased efficiencies and may be capable of being justified. If it can be shown that the parties would not have been able to enter the new market without joint selling, this may validate what would otherwise be prohibited. The beneficial effects of joint selling will be considered.
If the agreements do not involve setting prices, they are less likely to have anticompetitive effects. Joint selling between businesses that are not in competition or potentially in competition is not anti-competitive. Joint selling efforts for the sole purpose of exporting outside the EU will not generally be subject to EU law at all.
Joint selling agreements may be capable of being justified and not be anti-competitive, where the combined market share is relatively low, such as 15% or lower. Above this, it will need to be justified.
Joint sales may lead to greater efficiencies in distribution. Companies may establish a joint venture entity and agree to distribute each other\’s products through them. This may facilitate entry into a new market. Joint selling may extend to all matters, including price in some cases. In other cases, it may be more limited and relate to distribution, after-sales service and advertising only.
However, the arrangements may not be used to facilitate anticompetitive behaviour. The risks of information exchange and collusive behaviour will be scrutinised. Restrictions attaching to the parties to the agreement must be examined. They must be limited to no more than what is necessary for the proper operation of the agreement and arrangement.
If the agreement does not, by its object, restrict competition, it will be examined with reference to its effects. Generally, agreements are unlikely to breach competition law. European law, where the combined market share is less than 15%. Above that level, it should be assessed by reference to facts and circumstances.
Similar considerations are applicable to joint advertising campaigns. If the parties do not have market power, which will be assumed when they have less than 15% of the relevant market, joint advertising without price fixing is unlikely to be anti-competitive.
Electronic marketplaces for the sale and purchase of goods will generally be pro-competitive. However, because of the capture of information on prices, they may facilitate anticompetitive behaviour. If the following conditions are satisfied in respect of the joint venture, then they are likely to be acceptable from a competition perspective.
- exchanged or management must have no obligations towards the parent.
- they must be separated geographically from the parent’s location,
- there must be a separation of information from the parents and the exchange. Parents would not have information to the IT systems and communications systems of the exchange.
- Staff must understand the importance of maintaining confidentiality and separation.
EU Block Exemptions
This specialisation agreement block exemption provided that exemption covers the following types of agreement
- unilateral specialisation agreements by which one party agrees to cease or refrain from producing a product and purchase it from a competitor who agrees to supply the product;
- reciprocal specialisation agreements by which two or more parties agree on a reciprocal basis, to cease or refrain from producing certain different products and purchase them from another, which agrees to supply them;
- joint production agreements by which two or more parties agree to produce products jointly.
The block exemption applies if the combined market share of the parties to the specialisation agreement is less than 20% of the relevant market.
Hard-core provisions must not be included. The exemption does not apply to specialisation agreements aimed, directly or indirectly, at the fixing of prices, the limitation of output or sales or the allocation of markets or customers.
The R&D block exemption cover parties who are not competitors for the duration of the R&D period and seven years for the marketing of products where the products are jointly exploited. In the case of competitors, the same exemption applies, provided that at the time of entering the research and development arrangements, their combined market share does not exceed 25%. It continues for so long as this is the case in respect of the relevant market where the goods concerned are processed.
Hard-core restrictions must not be included. The exemption does not apply to R&D agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object:
- the restriction of the freedom of the parties to carry out R&D in an unrelated field;
- the restriction of the freedom of the parties to pursue R&D in a related field after the completion of the R&D agreement concerned;
- the limitation of output or sales, with certain exceptions.
The exemption does not apply to the following obligations contained in R&D agreements:
- the obligation not to challenge the validity of related intellectual property rights after completion of the R&D;
- the obligation not to grant licences to third parties to manufacture the contract products or to apply to contract technologies unless the agreement provides for the exploitation of the results by at least one of the parties and such exploitation takes place in the internal market vis-à-vis third parties.
Technology transfer agreements refer to patent, know-how and software copyright licensing agreements where the licensor allows the licensee to exploit the technology for the production of goods and services. Where the businesses are competitors, their combined share must be less than 20% of the relevant technology and product market. Where they are not competitors, the market share must be less than 30% of the relevant technology and product market.
The market share of the party in the relevant technology market is measured by reference to the presence of the licensed technology in the relevant market. The licensor’s market share in the technology market is the market share of the contract products produced by the licensor and its licensees. It is a condition of the exemption that certain hard-core restrictions are not present.
The hardcore restrictions for competitors include: restricting a party’s ability to determine prices when selling to a third party (resale price maintenance); reciprocal output/ production caps; restricting the licensee’s ability to exploit its own technology or a restriction on either party from carrying out independent research and development unless in the latter case, this is indispensable to prevent the disclosure of the licensed know-how to third parties; and the allocation of markets or customers between the parties (subject to a fairly complex set of exceptions).
The hardcore restrictions for non-competitors also include resale price maintenance as well as certain restrictions on passive sales on the part of the licensee (though there are a number of exceptions to this restriction) and restrictions on sales to end users by a licensee within a selective distribution system which operates at the retail level.
There is a block exemption agreement in relation to motor vehicle distribution. Manufacturers may agree on exclusive purchasing obligations with distributors. Non-compete obligations must be limited to 5 years, after which point the distributor must be free, if they wish, to change brands or to take another brand.
In the case of a combination of selective and exclusive distribution systems, both the selective and the exclusive distribution systems can be combined, provided that active sales outside the territory are allowed. Manufacturers can impose requirements on their distributors to carry out after-sales services.
The market shares of both the supplier and the distributor must be below 30% in their respective markets. The guidelines suggest that quantitative systems are likely to be compliant with the competition rules where the manufacturer’s market share is up to 40% even if they cannot use the block exemption.
With the market share threshold set at 30%, most authorised after-sales networks are unlikely to benefit from the block exemptions, so it is necessary to assess their compatibility with competition law on an individual basis.: As long as the market share threshold of 30% is met, it may be possible to prevent distributors from opening new branches.
The hardcore restrictions which must not be included are
- the restriction of members of a selective distribution system from selling spare parts to independent repairers which use these spare parts for the repair and maintenance of a motor vehicle;
- the restriction of a supplier of spare parts, repair tools or diagnostic or other equipment from selling these goods or services to authorised or independent distributors or to authorised or independent repairers or end-users;
- a manufacturer restriction of a supplier of components for the initial assembly of motor vehicles from placing its trade mark or logo effectively and in an easily visible manner on the components supplied or on spare parts.
There must be no restrictions on the method of selling or placing of trademarks or logos on spare parts Where parallel networks of similar vertical restraints cover more than 50% of the relevant market, the block exemption does not apply.
There are EU block exemptions in respect of road, rail, and inland waterway agreements. There are exemptions for certain technical agreements for small and medium-sized undertakings in the road and inland waterway area. There are limits to the application of the exemptions based on tonnage capacity.
There is an exemption for certain insurance agreements involving the distribution of information necessary for the purpose of calculating the average cost of covering a specified risk in the past, preparation of mortality tables and tables showing the frequency of illness, accident and invalidity for certain insurance purposes.
Joint studies on the impact of general circumstances either on the frequency or scale of future claims for a given risk or risk category or on the profitability of different types of investments and the distribution of such studies are exempted. Various conditions apply.
Competition law imputes the conduct of the subsidiary to the parent in accordance with its level of influence and control. There is no automatic agency or vicarious liability. Parent companies will generally be responsible for competition infringements by their subsidiaries. If, however, it can be shown that the subsidiary is sufficiently autonomous, then it may not have sufficient influence to be held responsible.
The higher the shareholding and the greater the degree of actual control, the more likely the holding company is to be held to have a decisive influence. Decisive influence may arise at lower percentage shareholdings. It will depend on the circumstances as to whether the parent has a decisive influence on the subsidiary.