(i) Why is competition law increasingly more important for Norwegian undertakings? (ii) Competition law and horizontal cooperation agreements

1

• (i) Why is competition law increasingly more
  important for Norwegian undertakings? (ii)
  Competition law and horizontal cooperation
  agreements

Industrijuristseminaret 2011Advokat Beret Sundet
2
Outline

• Why is competition law increasingly more
  important for Norwegian undertakings?
• Considerable risk that infringements are detected
• Potentially severe sanctions
• Horizontal cooperation agreements
• The prohibition on anti-competitive agreements
• Types of horizontal cooperation agreements
• Information exchange
• Joint bidding
• Trade associations
• Standardisation agreements
• Purchasing agreements
• Specialisation agreements
• RD agreements
• Commercialisation agreements

3

• (i) Why is competition law increasingly more
  important for Norwegian undertakings?

4
1. Overview
2. How are competition law infringements
detected?
3. Sanctions for competition law infringements
5
Cartels or hard core cooperation between
competitors prohibited in most jurisdictions

• An increasing number of countries have adopted
  rules prohibiting cartels
• Price fixing - agree or coordinate prices, price
  ranges, price increases or discounts
• Exchange of current or future price information
• Market sharing - allocate geographic areas,
  customers/customer groups or products/services
• Output limitation
• Bid rigging
• Similar rules in more than 100 countries
• Active enforcement of competition law
• Effects-based jurisdiction
• Norwegian undertakings may be investigated and
  sanctioned irrespective of
• where the anti-competitive actions take place
• destination of the products- or services
  concerned
• nationality of the parties

6
Norwegian undertakings and individuals may be
subject to (simultaneous) investigations from
several competition authorities

• Authorities with competence to use coercive means
  in Norway
• Konkurransetilsynet
• Påtalemyndigheten
• EFTA Surveillance Authority (ESA)
• European Commission / DG Comp
• National competition authorities inside and
  outside the EEA area

7
Norwegian undertakings sanctioned or investigated
by foreign competition authorities

• Odfjell/Stolt-Nielsen and others
• Price fixing/market sharing by four parcel tanker
  companies
• Odfjell settled with the US DoJ
• Accepted a fine of USD 42,5 million
• Bjørn Sjaastad, CEO, and Erik Nilsen, vice
  president, settled for four/three month in prison
• Stolt-Nielsen granted conditional amnesty from
  prosecution and fines for violation of U.S.
  antitrust laws
• Co-operated with the US DoJ Antitrust Division
  under its Corporate Leniency Program
• The conditional amnesty revoked in 2003 for lack
  of full cooperation
• Stolt-Nielsen retained conditional amnesty in
  2007 after several years of legal battle
• Legal costs estimated to exceed NOK 1 billion
• SAS Cargo
• Price fixing between 15 airline companies from
  2002 to 2006
• Fines
• MUSD 56,5 by US antitrust authorities
• MEUR 70 by the EU-commission

8
Norwegian undertakings sanctioned or investigated
by foreign competition authorities (2)

• Det Norske Veritas
• DNV and nine other members of the International
  Association of Classification Societies IACS
  were raided by the Commission in January 2008
• Allegations that the members of IACS reduced
  competition through horizontal cooperation and by
  reducing competition from non-IACS members
  through the application of IACS' membership
  criteria and limiting non-members access to the
  results of IACS' technical work.
• The case was closed with a Commitment decision in
  October 2009
• Nexans
• Press release 3 February 2009
• An investigation of Nexans, along with other
  international cable manufacturers, has been
  undertaken by competition authorities in Spain,
  Japan, South Korea, and the United States, as
  well as by the European Commission concerning in
  particular high voltage activities of the Group.
• Investigation ongoing.
• Tomra
• Abuse of dominance exclusivity agreements and
  loyalty rebates
• DG Comps fine MEUR 24
• Posten Norge AS
• Abuse of dominance exclusivity agreements with
  certain retail groups and outlets
• ESAs fine MEUR 12,89
• On appeal to the EFTA-court
• Color Line
• ESA sent Statement of Objections December 2009
• Exclusivity agreements with harbour facilities in
  Sandefjord and Strømstad
• Investigation ongoing

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1. Overview
2. How are competition law infringements
detected?
3. Sanctions for competition law infringements
10
Authorities with sophisticated detection methods

• Reactive methods
• Complaints (competitors, customers, agencies,
  employees)
• External information (whistleblowers, informants)
• Amnesty/leniency programs (immunity from fines,
  reduction of fines)
• Proactive methods
• Sector inquiries - use of economics (analyses of
  market structure, price patterns)
• Industry monitoring (press internet,
  infiltration, tracking informants)
• Agency cooperation

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Leniency

• Most countries have adopted leniency programmes
• Such programmes
• Encourage undertakings to report and put an end
  to illegal behaviour and to cooperate with the
  competition authorities
• Contribute to detecting cartels
• Destabilise cartels
• Leniency programmes have contributed to the
  detection of a number of cartels
• US about 20 leniency applications each year
• Japan 150 leniency applications in 2006
  subsequent to the entry into force of a leniency
  programme
• EU 11 out of 12 cartels sanctioned in 2009
  initiated through leniency
• Norway 6 leniency applications in 2010

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Leniency under EU and Norwegian competition law

• Immunity (full leniency)
• An undertaking may be given immunity/full
  leniency if it, on its own initiative, is the
  first to submit evidence that is sufficient to
  obtain approval for dawn raid prove an
  infringement of the prohibition on
  anti-competitive agreements
• Full leniency will not be granted if the
  undertaking
• does not fully cooperate with the Competition
  Authority
• does not end its participation in the
  infringement or
• has sought to coerce other undertakings to
  participate in the infringement
• Reduction of fines (partial leniency)
• The undertaking must provide evidence of the
  alleged infringement which represents significant
  added value with respect to the Competition
  Authoritys ability to prove a violation of the
  competition rules
• The first undertaking to provide significant
  added value will benefit from a reduction of
  30-50 of the fine that would otherwise be
  imposed
• The second undertaking benefits from a reduction
  of 20-30
• Subsequent undertakings that provide significant
  added value benefit from a reduction of up to 20

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Case COMP/39258 - Airfreight
Company Fine MEUR Leniency in
Lufthansa 0 100
Swiss International Air Lines  0 100
Martinair 29 500 50
Japan Airlines 35 700 25
Air France 182 920 20
KLM 127 160 20
Cathay Pacific Airways 57 120 20
LAN Chile 8 220 20
Qantas 8 880 20
Air Canada 21 037 15
SAS 70 167 15
Cargolux 79 900 15
British Airways 104 040 10
Singapore Airlines 74 800 0
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Wide powers of investigation and sophisticated
methods and tools

• Requests for information
• Simple requests
• By decision
• Unannounced inspections
• Enter premises
• Examine documents and files
• Seize evidence NCA only
• Take copies of evidence ESA/EU Commission
• Seal premises
• Case T-141/08, E.ON, EUR 38 million fine for
  breach of seal
• Ask for explanations of facts and documents and
  to record the answers
• Legal privilege
• In-house lawyers Norway / EU
• Take statements
• Privilege against self-incrimination not
  applicable
• Inspection of other premises (homes)

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International cooperation

• Bilateral cooperation
• E.g. Agreement between the Government of the USA
  and the European Commission regarding the
  application of their competition laws
• Multilateral cooperation
• International competition network
• OECD
• WTO
• Agreement between Norway, Sweden, Denmark and
  Iceland on cooperation on competition law
  enforcement
• Types of cooperation
• Coordinated inspections/investigation
• Exchange of information

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1. Competition law overview
2. How are competition law infringements
detected?
3. Sanctions for competition law infringements
17
Overview of sanctions for competition law
infringements

• Public enforcement
• Fines
• Administrative fines/Criminal fines
• Undertakings/Individuals
• Imprisonment
• Termination of infringement
• Interim measures
• Structural remedies
• Private enforcement
• Damages
• Injunctions
• Interim injunctions
• Nullity

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Fines

• Fines can be imposed on undertakings both for
  procedural and substantive infringements
• The infringements must have been committed
  intentionally or negligently
• Very large fines imposed for participations in
  hardcore cartels and abuse of dominance
• In absolute amounts, the fines imposed by the
  Norwegian Competition Authority have, so far,
  been relatively moderate compared to the fines
  imposed by DG Comp
• Fines imposed by the NCA should, in principle,
  reflect the level of fines imposed for
  competition law infringements in the EU
• Were the NCA to discover and sanction a
  long-lasting hardcore cartel in a large market,
  significantly higher fines than those which have
  been imposed to date can be expected

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Calculation of fines by DG Comp2006 Guidelines
on the method of setting fines

• Basic principles
• Gravity and duration
• Basic amount
• The proportion of the value of sales (up to 30 )
  in the last business year of goods or services
  affected by the infringement in the relevant
  geographic area
• Cartel infringements generally set at the
  higher end of the scale
• x multiplied by the number of years of
  participation in the infringement
• additional amount of between 15 and 25 of
  the value of sales is included in the fine in
  order to deter undertakings from entering into
  horisontal price fixing, market-sharing and
  output-limitation agreements
• Aggravating circumstances
• Recidivism up to 100 increase for repeated
  infringements
• Leadership/Instigator
• Refusal to co-operate or obstruction of
  investigation (e.g. destruction of documents)
• Legal maximum
• 10 of total annual turnover of total
  (worldwide) sales of all products, not only those
  concerned in the infringement

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• DG Comp ten highest fines for cartel
  infringements, per undertaking

Year Undertaking Case Amount in
2008 Saint Gobain Car glass 896.000.000
2009 E. ON Gas 553.000.000
2009  GDF Suez Gas 553.000.000
2007 ThyssenKrupp Elevators and escalators 479.669.850
2001 F.Hoffmann-La Roche AG Vitamins 462.000.000
2007 Siemens AG Gas insulated switchgear 396.562.500
2008 Pilkington Car glass 370.000.000
2010 Ideal Standard Bathroom fittings 326.091.196
2008 Sasol Ltd Candle waxes 318.200.000
2010 Air France/ KLM Airfreight (cargo) 310.080.000
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• US Ten highest fines for cartel infringements,
  per undertaking

Undertaking Product Amount (mill. USD) Geografic area Country
F. Hoffmann-La Roche, Ltd. (1999) Vitamins USD 500 International Switzerland
LG Display Co., Ltd LG Display America (2009) LCD-screens USD 400 International Korea
Société Air France og Koninklijke Luchtvaart Maatschappij, N.V. (2008) Air transport (Cargo) USD 350 International France (Société Air France) Netherlands (KLM)
Korean Air Lines Co., Ltd. (2007) Air transport (Cargo and passengers) USD 300 International Korea
British Airways PLC (2007) Air transport (Cargo and passengers) USD 300 International UK
Samsung Electronics Company, Ltd.Samsung Semiconductor, Inc. (2006) DRAM USD 300 International Korea
BASF AG (1999) Vitamins USD 225 International Germany
CHI MEI Corporation (2010) LCD-screens USD 220 International Taiwan
Hynix Semiconductor Inc.(2005) DRAM USD 185 International Korea
Infineon Technologies AG (2004) DRAM USD 160 International Germany
22
Civil damages claims

• Companies violating the competition rules risk
  civil damages claims from customers and
  competitors
• Objectives
• Compensation, deterrence
• The ECJ has established a right to damages for
  infringements of EU/EEA competition law
• Case C-453/99, Courage v Crehan, para 26 The
  full effectiveness of Article 101 TFEU ()
  would be put at risk if it were not open to any
  individual to claim damages for loss caused to
  him by a contract or by conduct liable to
  restrict or distort competition.
• The success of civil damages claims will depend
  on the relevant national rules with regard to
  procedural and substantive issues such as access
  to evidence, standing, class actions, fault,
  passing-on-defence, etc.

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Civil damages claims (2)

• Infringements of the prohibitions on
  anti-competitive agreements and abuse of
  dominance will normally be sufficient to
  establish liability
• Follow-on damages claims
• Injured parties customers and competitors
• Causation
• Quantifying damages
• US - treble damages
• Passing-on defence
• Class actions
• Time-bar
• Example SAS Cargo
• Paid US 13.9 million to settle class action
  lawsuits in the US

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Other consequences for companies

• Loss of reputation and goodwill
• Legal costs
• Interruption of day-to-day business and
  management
• Spend resources on finding, presenting and/or
  explaining documents and electronic files
• Inspections
• Interrogations
• Witness examinations
• Debarment from bidding on future projects

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Examples media coverage
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Sanctions against individuals

• In many jurisdictions competition law
  infringements are criminal offences
• Norway, USA, UK, Brazil, Canada, France, Hungary,
  Estonia, Romania, Slovenia, Japan, South-Korea
  etc.
• Fines
• US (up to USD 1 million)
• Brazil (up to 50 of the fine imposed on the
  company)
• France (up to EUR 75 000
• Norway (no upper limit, but in practice
  significantly lower than e.g. US)
• In some jurisdictions (Egypt, Jordan Ireland,
  Canada) individuals may receive the same fines as
  the company
• Imprisonment
• Up to ten years (USA)
• Up to six years (Norway)
• Up to five years (Brazil, Canada, Hungary and
  Ireland)
• Up to four years (France)
• Up to three years (Japan and South Korea)

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Other consequences for individuals

• Inspections
• Interrogations
• Witness examinations
• Ban from leaving the country
• Diciplinary sanctions, including dismissal

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Example former vice-president SAS Cargo
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• (ii) Competition law and horizontal cooperation
  agreements

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Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Standardisation agreements
6. Purchasing agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
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Introduction

• Horizontal cooperation - cooperation between
  actual or potential competitors
• Actual competitors companies active on the same
  relevant market
• Potential competitors a company is treated as a
  potential competitor of another company if, in
  case of a small but permanent increase in
  relative prices it is likely that it, within a
  short period of time, would undertake the
  necesary additional investments to enter the
  relevant market
• Companies that form part of the same
  undertaking are not considered competitors
• Strong economic incentives for undertakings to
  participate in horizontal cooperation can lead to
  substantial economic benefits (share risk, save
  costs, increase investments, pool know-how,
  enhance product quality and variety etc)
• Section 10 Norwegian Competition Act / Article 53
  EEA / Article 101 TFEU
• Provides the legal framework for an assessment of
  whether the cooperation is compatible/non-compatib
  le with competition law
• 14 December 2010 The Commission adopted new
  Guidelines on horizontal cooperation agreements
• http//eur-lex.europa.eu/LexUriServ/LexUriServ.do?
  uriCELEX52011XC0114(04)ENNOT

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Section 10 Norwegian Competition Act / Article
53 EEA / Article 101 TFEU

• Two-step analysis
• Section 10 (1) / Article 53 (1) EEA / Article 101
  (1) TFEU
• prohibits all agreements between undertakings,
  decisions by associations of undertakings and
  concerted practices which may affect trade
  between Member States and which have as their
  object or effect the prevention, restriction or
  distortion of competition
• Section 10 (3) / Article 53 (3) / Article 101 (3)
  TFEU sets out an exception rule provided four
  cumulative conditions are satisfied
• (a) The agreement must contribute to improving
  the production or distribution of goods or
  contribute to promoting technical or economic
  progress
• (b) Consumers must receive a fair share of the
  resulting benefits
• (c) The restrictions must be indispensable to the
  attainment of these objectives, and
• (d) The agreement must not afford the parties the
  possibility of eliminating competition in respect
  of a substantial part of the products in
  question.

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Anti-competitive object

• Restrictions of competition by object are those
  that by their very nature have the potential to
  restrict competition.
• It is not necessary to examine the actual effects
  of an agreement on the market once its
  anti-competitive object has been established
• Regard must be taken to the content of the
  agreement, the objectives it seeks to attain, and
  the economic and legal context of which it forms
  part
• Horizontal agreements
• Price fixing - agree or coordinate prices, price
  ranges, price increases or discounts
• Exchange of current or future price information
• Market sharing - allocate geographic areas,
  customers/customer groups or products/services
• Output limitation
• Bid rigging
• (Vertical agreements)
• Resale price maintenance
• Export bans
• Absolute territorial protection

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Anti-competitive effect

• If an agreement does not restrict competition by
  its object, it must be examined whether it has
  appreciable restrictive effects on competiton
• Account must be taken of both actual and
  potential effects
• The agreement must have, or be likely to have, an
  appreciable adverse impact on at least one of the
  parameters of competition such as price, output,
  product quality, product variety or innovation
• The undertakings must have, or obtain, some
  degree of market power
• i.e. the ability to profitably maintain prices
  above competitive levels for a period of time
• Proxy market shares gt 20-30
• Other factors stability of market shares over
  time, entry barriers, countervailing power of
  buyers/suppliers

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Exemptions

• Section 10 (3) / Article 53 (3) / Article 101 (3)
  TFEU
• Individual cases
• The burden of proof rests on the undertakings
  claiming that the criteria qualifying for an
  exemption are satisfied
• Sliding scale - The greater the restriction of
  competition, the greater the efficiencies and the
  pass-on to consumers must be to qualify for an
  exemption
• Block Exemptions
• New Block exemption on RD agreements
• New Block exemption on specialisation agreements

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Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Standardisation agreements
6. Purchasing agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
37
Information exchange

• Exchange of information between actual or
  potential competitors may be contrary to the
  prohibition on anti-competitive agreements
• Object or effect
• Future conduct regarding future prices and
  quantities anti-competitive object
• Other sensitive information
• Different forms of information exchange
• Directly between competitors
• Through a common agency (e.g. trade association)
• Through third parties (market research
  organisation, suppliers, customers)
• Information exchange can take place in different
  contexts
• Pure information exchange
• In the context of a cooperation agreement

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Information exchange (2)

• The main concern is the exchange of strategic
  information that facilitate coordination of
  companies competitive behaviour
• Illegal information exchange does not have to be
  reciprocal
• A situation where only one undertaking discloses
  strategic information to its competitors who
  accept it can be contrary to competition law
• Illegal information exchange can take place on a
  single occasion
• The competition authorities do not have to prove
  that the exchange of information has affected the
  undertakings market conduct
• When an undertaking receives strategic data from
  a competitor, it will be presumed to have
  accepted the information and adapted its market
  conduct accordingly unless it responds with a
  clear statement that it does not wish to receive
  such data

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Strategic information

• Data that reduces strategic uncertainty in the
  market
• Aggregated vs individualised (company level) data
• Benchmarking
• Historic data vs data that is indicative of
  future conduct
• Public data vs non-public information
• Data received from customers/suppliers
• Types of strategic information
• Prices (actual prices, discounts, increases,
  reductions, rebates)
• Customer lists
• Production costs
• Quantities
• Turnovers
• Sales
• Capacities
• Qualities
• Marketing plans
• Investments

40
Example

• Case C-8/08, T-Mobile Netherlands
• Reference for a prelimiary ruling in proceedings
  between T-Mobile Netherlands and the Netherlands
  competition authority
• The proceedings concerned a decision by the NCA
  in which five mobile operators were fined for
  exchanging confidential information at a single
  meeting with the aim of restricting competition
• Held
• each economic operator must determine
  independently the policy which he intends to
  adopt on the common market
• this requirement of independence does not
  deprive economic operators of the right to adapt
  themselves intelligently to the existing or
  anticipated conduct of their competitors,
• it does, none the less, strictly preclude any
  direct or indirect contact between such operators
  by which an undertaking may influence the conduct
  on the market of its actual or potential
  competitors or disclose to them its decisions or
  intentions concerning its own conduct on the
  market ()there is a presumption of a causal
  connection between the concerted practice and the
  conduct of the undertaking on that market, even
  if the concerted action is the result of a
  meeting held by the participating undertakings on
  a single occasion

41
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Standardisation agreements
6. Purchasing agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
42
Bid rigging

• Bid rigging occurs when actual or potential
  competitors collaborate on responses to
  invitations to tender for the supply of goods and
  services
• Bid rigging limits price competition between the
  parties and automatically infringe competition
  law
• Types of bid rigging
• Bid suppression
• A party agrees not to submit a bid so that
  another party can win the contest
• Cover bids
• A party agrees to submit a bid with an excessive
  price
• Bid rotation
• The parties take turns bidding on different
  contracts
• Subcontract bid rigging
• A company agrees not to submit a bid, so that
  another party can win the contest, on the
  condition that the company will receive a
  subcontract

43
Examples

• V2009-17, Grunnarbeid / Gran Ekran
• The NCA held that the parties cooperation in
  relation to a tender for the rehabilitation of
  five municipal bridges in Nord-Trøndelag in 2007
  was contrary to Section 10 of the Norwegian
  Competition Act
• According to the NCA, the cooperation had led to
  a common understanding as to which party should
  give the lowest bid, and which party should bid
  without intending to win (cover bid)
• The NCA imposed a fine of MNOK 7
• The decision upheld by Sør-Trøndelag tingrett
• Appealed
• Other Norwegian examples
• V2008-18, Håkonrune Rør AS og Oslo VVS total
  fine MNOK 750 000
• V2009-7, Taxi Midt-Norge total fine NOK 300 000

44
Examples (2)

• Asfaltsmålet , MD 200911, Swedish market court
• Cover bids and bid suppression in relation to
  public procurement contracts in the Swedish
  asphalt market between 1998 and 2001
• The undertakings involved received the following
  fines
• NCC AB MSEK 200 (Marknadsdomstolen)
• Skanska Sverige AB MSEK 170 (Stockholms
  tingsrätt)
• Vägverket MSEK 50 (Stockholms tingsrätt)
• Peab Sverige AB MSEK 40 (Marknadsdomstolen)
• Peab Asfalt AB MSEK 33,42 (Marknadsdomstolen)
• Kvalitetsasfalt i Mellansverige AB MSEK 2,5
  (Stockholms tingsrätt)
• Sandahls Grus Asfalt MSEK 2,5
  (Marknadsdomstolen)
• Peab Asfalt Syd AB MSEK 1,5 (Marknadsdomstolen)
• Total MSEK 500

45
Legitimate joint bidding

• Joint bidding between non-competitors (neither
  actual nor potential) is not prohibited
• The contracting party should, however, always be
  informed of the cooperation
• Joint bidding on projects the parties are unable
  to carry out individually
• Normally not restrictive of competition, unless
  the parties could have carried out the project
  with less stringent restrictions or with fewer
  participants
• Relevant factors technical capabilities,
  capacities, resources, funding, know-how
• Parties ability to bid individually must be
  assessed in relation each project
• Each party must assess its own ability before
  contacting the other
• Information exchange-spillover effects
• Joint offers requested by customer
• On the customers own initiative
• Sub-projects
• The invitation to tender or solicitation is
  broken down into various sub-projects
• Joint bidding on the entire project may reduce
  competition on the sub-projects, even where the
  parties are not actual or potential competitors
  on the same sub-projects
• Joint bidding may nevertheless be exempted
  provided the cooperation leads to efficiencies
  that outweigh the restrictive effect on
  competition

46
Subcontracts

• Subcontracting agreements between competitors do
  not fall under the prohibitions on
  anti-competitive agreements, if they are
• limited to individual sales and purchases on the
  merchant market
• without any further obligations, and
• without forming part of a wider commercial
  relationship between the parties
• Subcontracting agreements between competitors
  subsequent to one of the parties winning a tender
  may be compatible with competition law (unless
  subcontract bid rigging)
• Subcontracting agreements between actual or
  potential competitors prior to submitting a
  tender will likely be considered anti-competitive

47
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Standardisation agreements
6. Purchasing agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
48
Trade associations

• Article 101 TFEU - Decisions by associations of
  undertakings
• Legitimate functions
• Training/education
• Government contact/lobbying
• Marketing/promotion
• Anti-competitive practices
• Medium for cartel - organisation, operation,
  monitoring
• Recommendations, i.e. with regard to
  price-setting
• even non-binding recommendations if intended to
  determine, or likely to have the effect of
  determining the members conduct
• Information exchange
• Collect and disseminate commercially sensitive
  information
• Exclusion of non-members from competitive
  opportunities
• 2008 study by the Swedish Competition Authority
• 1/3 of 479 Swedish trade associations engaged in
  conduct that could be contrary to the competition
  rules

49
Examples

• V2009-15, Norges turbileierforbund
• The NCA held that Norges Turbileierforbund, in
  its membership magazine, had encouraged its
  members to increase their prices contrary to
  Section 10 of the Norwegian Competition Act.
• Norges Turbileierforbund had, inter alia,
  launched a campaign called FEMHUNDRINGEN
• The NCA imposed a fine of NOK 400 000
• UK Tractors
• Eight UK manufacturers and importers of tractors
  opreated, through the Agricultural Engineers
  Association, an information exchange agreement
  called the UK Agricultural Tractor Registration
  Exchange
• The information revealed aggregate industry
  information, information concerning sales of each
  manufacturer and their market shares for various
  geographical areas and imports and exports
  between different territories
• The European Commission held that the agreement
  on the exchange of information infringed Article
  101 TFEU, and ordered the members of the
  agreement to put the infringement to an end
• The decision was upheld by the General Court in
  Case T-35/92, John Deere v Commission

50
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Standardisation agreements
6. Purchasing agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
51
Standardisation agreements

• Standardisation agreements have as their primary
  objective the definition of technical or quality
  requirements with which current or future
  products, production processes, services or
  methods may comply
• standardisation of different grades or sizes of a
  particular product
• technical specifications in product or services
  markets where compatibility and interoperability
  with other products or systems is essential.
• terms of access to a particular quality mark or
  for approval by a regulatory body
• standards on environmental performance of
  products or production processes
• Different forms of standardisation agreements
• Consensus based standards by recognised bodies
• Consortia
• Agreements between independent undertakings

52
Economic effects of standisation agreements

• Standardisation agreements may lead to
  efficiencies
• Enhance quality, provide information, ensure
  interoperability and compatibility
• Increase competition
• Standardisation agreements may also reduce
  competition
• Reduce price competition
• Foreclosure of innovative technologies
• Foreclosure of competitors by preventing
  effective access to the standard

53
Legal assessment of standardisasion agreements

• Restrictions of competition by object
• Standards aimed at excluding actual or potential
  competitors
• Standards to prevent or delay new technology
• Trade associations which put pressure on third
  parties not to market products that do not comply
  with the standard
• Restricted access to the standards
• Restrictions of competition by effect
• Market shares of the goods and services based on
  the standard
• Are the members free to develop alternative
  standards?
• Is access to the standard available on fair,
  reasonable and non-discriminatory terms?
• Is participation in the standard-setting process
  open to all stakeholders in the market?
• Exemption
• Efficiencies that outweigh the anti-competitive
  effects

54
Standard terms

• Potential anti-competitive effects
• Limit product choice and innovation
• Restrict price-competition
• Foreclosure of competitors
• Restrictions of competition by object
• Refusal to give competitors access to standard
  terms, the use of which is necessary to be able
  to compete on the market
• Standard terms which influence the prices charged
  recommended prices, rebates, calculation
  methods etc
• Restrictions of competition by effect
• As long as participation in the establishment of
  standard terms is unretricted, the terms are
  non-binding and effectively accessible for all,
  standard terms are unlikely to restrict
  competition
• Standard terms which define product
  characteristics may limit product choice and
  innovation
• Standard terms which lead to an allignment of
  other key parameters of competition

55
Examples

• Case 39416, Ship Classification
• Commission commitment decision under Article 9,
  Reg 1/2003, to address concerns that the
  International Association of Classification
  Societies (IACS) may have infringed Article 101
  TFEU and Article 53 EEA
• The concern was that the IACS might have
  prevented other classification societies (CS)
  from
• Joining IACS
• Participating in the process of elaboration of
  IACS technical standards
• Having full access to background documents with
  regard to the application of IACS technical
  standards
• This behaviour could prevent market entry of
  non-IACS members, thereby restrciting competition
• The members of IACS offered commitments to meet
  the Commissions concerns
• By decision pursuant to Article 9, Reg 1/2003,
  the commitments were made binding upon the
  undertakings

56
Examples (2)

• Case IV/31.458 X/Open Group
• Commission decision granting an individual
  exemption under Article 101 (3) TFEU regarding
  mebership to the X/Open Group
• The X/Open Group developed open industry
  standards for Unix operating systems and
  applications
• Membership to the X/Open Group was subject to
  majority decision, and limited to major
  manufacturers with UNIX expertise and a European
  presence
• The Commission held that membership of the group
  conferred an appreciable competitive advantage on
  the members vis-à-vis their competitors
• The restriction of admission of new members
  therefore resulted in an infringement of Article
  101 (1) TFEU
• The Commission, nevertheless, found that the
  agreement qualified for an exemption pursuant to
  Article 101 (3) TFEU, because the members are
  the best to ascertain and weigh the advantages
  and disadvantages of admitting a new member for
  the efficiency of the work of the Group

57
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Standardisation agreements
6. Purchasing agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
58
Purchasing agreements

• Different types of joint purchasing arrangements
• Joint controlled company
• Association/alliance
• Contractual arrangement
• Joint purchising may lead to efficiencies
• Creation of buyer power leading to lower prices,
  better quality products that are passed-on to
  final consumers
• Joint purchasing may restrict competition
• Reduced competition between the parties on the
  downstream selling market
• Collusion on the downstream market
• No pass-on of benefits to customers
• Foreclosure of competing purchasers by limiting
  their access to upstream suppliers

59
Legal assessment of purchasing agreements

• Restrictions of competition by object
• Tool to engage in a disguised cartel
• Price fixing, output limitation, market sharing
  on the downstream selling market
• Fixing the purchase prices is not a restriction
  of competition by object
• Restrictions of competition by effect
• Market power
• Unlikely that market power exists if the parties
  to the joint purchasing arrangement have a market
  share below 15 on both the purchasing and
  selling markets
• Market power on the selling market may cause
  restrictive effects on this market
• Market power on the buying market may foreclose
  other buyers
• Collusion
• Common costs
• Information exchange
• Exemption
• Lower purchase prices
• Reduced transaction costs
• Reduced transportation and storage costs

60
Example

• Case C-250/92, Gøttrup-Klim Grovvareforeninger
  and others v Dansk Landbrugs Grovvareselskab
• Reference for a preliminary ruling in proceedings
  between 37 local cooperative associations
  specialising in the distribution of of farm
  supplies and DLG
• DLG was a cooperative society whose object was to
  provide its members with farm supplies, including
  fertilizers and plant protection products, and to
  negotioate the best prices for its members
• The dispute concerned a clause precluding DLGs
  members from holding membership of any other form
  of cooperative organisation in competition with
  DLG
• The ECJ held that dual membership to competing
  cooperative purchasing associations would
  jeopardise both the proper functioning of DLG and
  its contractual power in relation to producers
• The clause forbidding DLGs members from holding
  membership of any other cooperative was therefore
  not caught by Article 101 (1) TFEU, so long as
  the prohibition was restricted to what was
  necessary to ensure the proper functioning and
  contractual power of the cooperative

61
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Purchasing agreements
6. Standardisation agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
62
Specialisation agreements

• Types of specialisation agreements"
• Unilateral specialisation agreement
• an agreement between two parties which are active
  on the same product market
• one party agrees to fully or partly cease
  production of certain products or to refrain from
  producing those products and to purchase them
  from the other party
• Reciprocal specialisation agreement
• an agreement between two or more parties which
  are active on the same product market,
• two or more parties on a reciprocal basis agree
  to fully or partly cease or refrain from
  producing certain but different products and to
  purchase these products from the other parties
• Joint production agreement
• an agreement by virtue of which two or more
  parties agree to produce certain products jointly

63
Economic effects of specialisation agreements

• Specialisation agreements may lead to
  efficiencies
• contribute to improving the production or
  distribution of goods,
• especially where the parties have complementary
  skills, assets or activities, because they can
  concentrate on the manufacture of certain
  products
• Specialisation agreements may reduce competition
• Limit competition between the parties
• Foreclosure where the parties to the
  specialisation agreement are vertically integrated

64
New Block Exemption on specialisation agreements

• Commission Regulation that Block Exempts certain
  types of specialisation agreements from the
  prohibition on anti-competitive agreements
• Market share threshold
• The combined market share of the parties must not
  exceed 20 on any relevant market
• Hardcore restrictions
• The Block Exemption does not apply to
  specialisation agreements which have as their
  object
• (a) the fixing of prices when selling the
  products to third parties with the exception of
  the fixing of prices charged to immediate
  customers in the context of joint distribution
• (b) the limitation of output or sales with the
  exception of
• (i) provisions on the agreed amount of products
  in the context of unilateral or reciprocal
  specialisation agreements or the setting of the
  capacity and production volume in the context of
  a joint production agreement and
• (ii) the setting of sales targets in the context
  of joint distribution
• (c) the allocation of markets or customers

65
Specialisation agreements not covered by the
Block Exemption

• Restrictions of competition by object
• Agreements which involve price-fixing, limiting
  output or sharing markets or customers
• Except where the parties agree on the output
  directly concerned by the production agreement,
  provided that the other parameters of competition
  are not eliminated or
• a production agreement that also provides for the
  joint distribution of the jointly manufactured
  products envisages the joint setting of the sales
  prices for those products, and only those
  products, provided that that restriction is
  necessary for producing jointly, meaning that the
  parties would not otherwise have an incentive to
  enter into the production agreement in the first
  place.
• Restriction of competition by effect
• Market power
• Combined market share lt 20 - Block Exempted
• Combined market share gt 20 - individual
  assessment
• Market concentration
• Entry barriers
• Nature of the specialisation agreement
• Production agreements which also involve
  commercialisation functions, such as joint
  distribution or marketing, carry a higher risk of
  restrictive effects on competition than pure
  joint production agreements.
• Exemption
• Efficiencies that outweigh the anti-competitive
  effects

66
Examples

• IV/26.437 Jaz/Peter (1977)
• Both companies, Jaz and Peter, manufactured
  clocks
• The parties agreed that Peter would specialise in
  the manufacture of large mechanical alarm clocks
  and Jaz would specialise in pendulum clocks and
  electrical alarm clocks
• The parties further agreed that each would supply
  the other with their products and spare parts, to
  exchange know-how, and not to buy from third
  parties products they could obtain from the other
• The Commission held that the agreement infringed
  Article 101 (1) TFEU
• The agreement, nevertheless, satisfied the
  conditions for an exemption under Article 101 (3)
  TFEU, because it allowed each of the parties to
  concentrate entirely on manufacturing those
  products for which it had bigger and better
  manufacturing facilities than its partner
• Jaz had increased production by 400 , Peter had
  increased production by 250

67
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Purchasing agreements
6. Standardisation agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
68
RD agreements

• RD agreements vary in form and scope
• Cooperation agreements
• Joint ventures
• Joint improvement of existing technologies
• Joint research, development and marketing of new
  products
• RD agreements may create efficiencies
• promote technical and economic progress
• the parties contribute complementary skills,
  assets or activities to the cooperation
• RD agreements may restrict competition
• reduce or slow down innovation
• reduce competition between the parties outside
  the scope of the agreement
• collusion

69
New Block Exemption on RD agreements

• Conditions for exemption
• All the parties have full access to the final
  results of the joint RD for the purposes of
  further RD, as soon as they become available
• Where the research and development agreement
  provides only for joint RD, each party must be
  granted access to any pre-existing know-how of
  the other parties, if this know-how is
  indispensable for the purposes of its
  exploitation of the results
• Any joint exploitation may only pertain to
  results which are protected by intellectual
  property rights or constitute know-how and which
  are indispensable for the manufacture of the
  contract products or the application of the
  contract technologies
• Market share threshold and duration of exemption
• Non-competitors
• The exemption shall apply for the duration of the
  RD agreement
• Where the results are jointly exploited, the
  exemption shall continue to apply for 7 years
  from the time the contract products or contract
  technologies are first put on the market within
  the internal market.
• Competitors
• The exemption shall apply for the duration of the
  RD agreement only if, at the time the research
  and development agreement is entered into, the
  parties combined market shares do not exceed 25
• The exemption shall continue to apply as long as
  the combined market share of the parties does not
  exceed 25 on the relevant product and
  technology markets

70
Hardcore restrictions

• The restriction of the freedom of the parties to
  carry out research and development independently
  or in cooperation with third parties in a field
  unconnected with that to which the research and
  development agreement relates or, after the
  completion of the joint research and development,
  in the field to which it relates or in a
  connected field
• The limitation of output or sales
• Exceptions
• The fixing of prices when selling the contract
  product or licensing the contract technologies to
  third parties
• Exceptions
• The restriction of the territory in which, or of
  the customers to whom, the parties may passively
  sell the contract products or license the
  contract technologies, with the exception of the
  requirement to exclusively license the results to
  another party
• The requirement not to make any, or to limit,
  active sales of the contract products or contract
  technologies in territories or to customers which
  have not been exclusively allocated to one of the
  parties by way of specialisation in the context
  of exploitation
• The requirement to refuse to meet demand from
  customers in the parties respective territories,
  or from customers otherwise allocated between the
  parties by way of specialisation in the context
  of exploitation, who would market the contract
  products in other territories within the internal
  market
• The requirement to make it difficult for users or
  resellers to obtain the contract products from
  other resellers within the internal market

71
RD agreements not covered by the Block Exemption

• Restrictions of competition by object
• RD agreements restrict competition by object if
  they do not truly concern joint RD, but serve as
  a tool to engage in a disguised cartel (price
  fixing, output limitation or market allocation)
• Restrictions of competition by effect
• Most RD agreements are unlikely restrict
  competition
• Agreements relating to RD at an early stage, far
  removed from the exploitation of possible results
• RD agreements between non-competitors
• the parties are not able to carry out the
  necessary RD independently, for instance due to
  technical capabilities
• RD cooperation which does not include joint
  exploitation of possible results by means of
  licensing, production and/or marketing
• RD directed at an entirely new product
• RD agreements are only likely to restrict
  competition where the parties have market power
• combined market share lt 25 covered by the Block
  Exemption
• the stronger the combined position of the
  parties, the more likely the RD agreement can
  cause restrictive effects on competition
• RD directed towards limited improvement
• RD which includes joint exploitation
• Exemption

72
Example

• IV/34.252 Philips/Osram
• Joint venture agreement between Philps and Osram
  regarding the manufacture and sale of certain
  lead glass tubing for lamps
• The joint venture would be based in Philips
  current facilities
• The Commission considered that since Philips
  already produced lead glass and Osram had the
  financial, technical and research capabilities to
  set up a new facility to produce lead glass, the
  joint venture eliminated at least potential
  competition from Osram
• The agreement was held to appreciably restrict
  competition within the meaning of Article 101 (1)
  TFEU
• However, since the agreement rationalised
  production by allowing Osram to eliminate its
  obsolete facilities, Philips to relocate
  production, enabled a concentration of RD
  activities and the achievment of economies of
  scale, the Commission held that the criteria in
  Article 101 (3) TFEU were satisfied

73
Horizontal cooperation agreements
1. Introduction
2. Information exchange
3. Joint bidding / bid rigging
4. Trade associations
5. Purchasing agreements
6. Standardisation agreements
7. Specialisation agreements
8. RD agreements
9. Commercialisation agreements
74
Commercialisation agreements

• Cooperation between competitors in the selling,
  distribution and/or promotion of products
• Commercialisation agreements may lead to
  economies of scale or scope
• Such agreements may also lead to price fixing,
  output limitation, market sharing or information
  exchange

75
Legal assessment of commercialisation agreements

• Restrictions of competition by object
• Agreements limited to joint selling generally
  have the object of coordinating the procing
  policy of competing manufacturers or service
  providers
• Market sharing, output limitation
• Restrictions of competition by effect
• A commercialisation agreement is not likely to
  restrict competition if it is necessary to allow
  a party to enter a market it could not have
  entered individually
• Market power
• Unlikely that market power exists if the parties
  have a combined market share not exceeding 15
• The greater the market power, the more likely the
  agreement will restrict competition
• Collusion high degree of commonality of costs
• Information exchange