Trade Associations and EU Competition Law

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Trade Associations and EU Competition Law

• Alan S. Reid
• Lecturer in Law
• Robert Gordon University, Aberdeen, UK

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Purposes of Competition Law

• Prevent Cartels
• Prevent anti-competitive takeovers and mergers
• Preventing abuse of a dominant position
• Restricting the power of member States to
  interfere with the market place

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Objectives of EU competition law

• Pursuit of economic efficiency
• Protection of consumers/smaller firms
• Creation/Continuing operation of the Internal
  Market in conjunction with the free movement
  provisions of the EC Treaty

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Article 81 - Cartels

• Trade Associations may cause competition
  difficulties where the following characteristics
  are present
• Oligopolistic market
• Low level of product differentiation
• Association represents a wide range of interests,
  horizontally and vertically manufacturers/distri
  butors/wholesalers

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Problems posed by Trade Associations

• May set minimum or maximum prices
• May set quotas
• May impose penalties for breach of the agreement

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Rules of the Trade Associations

• Rules of the Association, even if non-binding,
  may violate competition law
• Foreclosure of the domestic or regional market
  through product certification systems
• Degree of control wielded by the Association in
  the relevant market, determines whether
  competition law has been violated

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Objectives of the Association

• Case C-137/95 SPO
• Dutch Building Trade Associations
• 3 Purposes
• Promote competition
• Prevent improper conduct in price tendering
• Promote the formation of economically justified
  prices

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Membership Criteria of the Trade Association

• Case T-206/99 Metropole
• European Broadcasting Union
• Provided for 2 types of membership active and
  associate
• Metropole repeatedly failed to gain membership
• Other companies remained associates after they
  failed to satisfy the membership criteria
• Discriminatory membership rules

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Rules for Conducting Business SCK Case

• SCK certified crane hirers in the Netherlands and
  FNK was the umbrella organisation for crane
  hirers in the Netherlands
• Practical result of the rules of both
  organisations non-SCK certified companies could
  not penetrate the Dutch market
• SCK operated a closed system, since it refused to
  recognise the certificates issued by equivalent
  foreign certifiers
• Thus the purpose of SCK was not to ensure quality
  BUT to restrict non-Dutch competition

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Exchanges of Information

• Information Exchange Network
• Sensitive price information distributed between
  the members of the trade association
• Transparency to be welcomed in a healthily
  competitive industry
• Transparency destructive of competition in a
  tight oligopoly
• Uncertainty replaced by parallelism

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Exchanges of Information II

• Can be very useful for companies
• They understand the market and can adapt their
  policies accordingly
• However, can be anti-competitive where the
  information
• Is very detailed
• Is current
• Is from very reliable sources
• Even information exchange in an informal setting
  can give rise to competition concerns
• Gentlemans agreement will also violate EU
  Competition law

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State Aid

• Trade Associations may object to the granting of
  such aid or indeed the recovery of illegal aid
  from its members
• Case T-55/99 illegal state aid was recovered
  from the members of the Spanish Commercial
  Transport Association
• Case T-613/97 the aid given by La Poste to its
  subsidiary was not illegal

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Enforcers of Competition Law

• Regulation 1/03 decentralises the enforcement of
  European competition law
• Commission will be freed up to concentrate on
  the strategically important cases
• This new policy necessitates a shift from public
  law enforcement to that of private law
  enforcement, via affected legal and natural
  persons

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Competition law enforcement

• 1 Commission may undertake its own investigations
• 2 Commission receives notification from member
  States
• 3 Commission receives notification from
  interested persons
• 2 and 3 become more important next year after
  Regulation 1/03 comes into force

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Trade Associations and direct and individual
concern

• Administrative Competition law is already
  generous to applicants aggrieved by
  anti-competitive activity
• Article 230, the general provision on standing is
  much more restrictive direct and individual
  concern

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Direct and Individual concern a relaxation of
the rules?

• Case 50/00 Union de Pequenos
• Trade Association can only take action to annul a
  Community measure where
• Legal Provision expressly grants a procedural
  power to the Association
• Association represents an undertaking which could
  bring an action
• Association is individually distinguished
• HELD NO RIGHT TO BRING AN ACTION

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Direct and Individual Concern IIA false dawn?

• Case T-177/01 Jego Quere
• Court of First Instance held that individual
  concern had been too restrictively defined
• Court of Justice cases are to be preferred over
  CFI jurisprudence
• Jego Quere have appealed and Advocate General
  Jacobs has delivered his Opinion in the case
• He appears to be taking a very conservative
  approach to direct and individual concern which
  he spurned in the original case

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Conclusion

• Trade Associations can act anti-competitively or
  pro-competitively
• Short-term protectionist policies may achieve
  short term gains at the expense of innovation and
  fundamental reform which will provide long-term
  growth and security
• Trade Associations can act as an early warning
  system
• Trade Associations can help European industry
  respond to the rigours of globalisation and the
  need for improved competitiveness