European Union: Horizontal Co-Operation - The European Commission’s Draft Guidelines Are A Helpful Development

Last Updated: 26 October 2010
Article by Dr. Gordon Christian and Simon Holmes

Adam Smith famously said that "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices". So it is unsurprising that both competition authorities and legal advisers to companies that conclude co-operative agreements with competitors (such as research and development, production, purchasing, commercialisation, standardisation and exchange of information) usually treat these issues with care, given that such conduct can lead to price-fixing, market sharing or limiting output.

Nevertheless, however laudable such caution may be for compliance-minded companies, it is easy to forget that there is a wide range of co-operation mechanisms between competitors that are unlikely to be of concern from a competition perspective. Indeed, many may give rise to valuable efficiencies – and even be procompetitive.

Currently, guidance on co-operation between competitors at EU level can be found in two block exemption regulations (on research and development agreements and on specialisation agreements, respectively), as well as in the accompanying horizontal guidelines. Following a number of European Commission cases and judgments by the Community courts in this area, and faced with the fact that the block exemptions are due to expire shortly, last month the Commission published two updated block exemption regulations and draft horizontal cooperation guidelines (the Draft Guidelines). Following a consultation period that has recently closed, the Commission hopes to adopt final versions of the block exemption regulations and the Draft Guidelines by the end of 2010.

This article is the first in a two-part series analysing the Draft Guidelines. This article will focus on the new chapter in the Guidelines on information exchange issues, and the second article later this year will focus on the expanded treatment of standardisation issues.

Previous approach to information exchange cases

For a long time, the Commission's decision (upheld on appeal by the General Court) in the UK Agricultural Tractor Exchange case was the leading authority on the Commission's practice in information exchange cases. However, more recently, both the Commission and national competition authorities (such as the UK's Office of Fair Trading and the French competition authority) have made decisions in "pure" information exchange cases. These are cases where it was the information exchange on its own that was found to be problematic – ie not simply where the information exchange supported other anticompetitive behaviour such as price-fixing and market sharing. In addition, the jurisprudence on information exchange coming from the Community courts has become tougher. Last year, the European Court of Justice confirmed in the T-Mobile Netherlands case that an information exchange at a single meeting between competitors can be problematic (although it is important to note that this was not a "pure" information exchange case, as the meeting also involved discussions about commission payments to dealers).

However, despite the increasing importance of information exchange issues, there was no general Commission guidance on the principles according to which information exchange cases should be assessed. The horizontal guidelines published in 2000 do not deal with information exchange cases at all.

In a Q&A document accompanying the Draft Guidelines, the Commission admits that there was "strong demand from stakeholders and national competition authorities for extensive guidance on the assessment of information exchange".

Draft Guidelines' approach to information exchange

General principles

In terms of general principles, the Draft Guidelines confirm the two-step approach that must be taken to assess any horizontal co-operation agreements (including information exchange agreements): "The first step, under article 101(1), is to assess whether an agreement between undertakings, which is capable of affecting trade between member states, has an anticompetitive object or actual or potential restrictive effects on competition. The second step, under article 101(3), [...] is to determine the procompetitive benefits produced by that agreement and to assess whether these procompetitive effects outweigh the restrictive effects on competition".

The key question that will determine whether or not an information exchange is problematic from a competition perspective is set out in paragraph 58 of the Draft Guidelines. Essentially, where the information exchange enables companies to be aware of the market strategies of their competitors, the information exchange may lead to restrictive effects on competition. However, as noted below, the Commission also clearly recognises that information exchange can be procompetitive as it gives rise to efficiencies.

Main competition concerns

On the assumption that an agreement, concerted practice or decision of an association of undertakings has been established (otherwise article 101 will not apply), the Commission notes that there are fundamentally two possible types of harm that can result from information exchange. First, there is a risk that companies will align their competitive behaviour in a market as a result of exchanging competitively sensitive information. Second, if a significant number of companies exchange highly strategic information that gives those companies a competitive advantage when compared to other market players, the information exchange may give rise to anticompetitive foreclosure concerns.

Information exchange – restriction of competition by object or effect?

One of the most important sections in the Draft Guidelines dealing with information exchange is the part that explains whether a particular information exchange is likely to be analysed as a restriction of competition by "object" or "effect". This categorisation has a profound impact and is therefore very important in practice. As object restrictions are considered more serious than effect restrictions, it is more likely that competition authorities will dedicate resources to investigating the former. This is also because such restrictions are easier to prove, as no effects in the market need to be demonstrated. However, until relatively recently, there was a vigorous debate among practitioners and commentators as to the circumstances in which competition authorities could classify "pure" information exchange cases as object restrictions. It was uncontroversial that information exchanges that formed part of wider anticompetitive practices (such as price-fixing or market sharing) constituted restrictions by object – however, it was far from clear whether "pure" information exchanges were serious enough to be classified like that. Some would argue that competition authorities may be tempted to stretch the definition of object cases to include "pure" information exchanges to reduce the evidentiary burden required in such instances.

Restrictions by object

In the Draft Guidelines, the Commission has now clarified that the exchange of individualised data regarding intended future (and, in certain circumstances, current) future prices or quantities (such as sales, market shares, territories or customer lists) constitutes a restriction of competition by object. On that basis, even "pure" information exchanges of such data will be investigated and fined as cartel conduct.

Restrictions by effect

The Draft Guidelines also say that any information exchanges that do not fall into the restriction by object category will be of concern as a restriction by effect only if the conduct in question has an appreciable adverse impact on one (or several) of the parameters of competition, such as price, output, product quality, product variety or innovation. There are several key factors that need to be taken into account when considering whether an information exchange represents a restriction of competition by effect, and in this regard the Draft Guidelines essentially codify existing practice. For example, the analysis of the information exchange must take into account the extent of the market that it covers. The more of the market that is covered by the information exchange, the less likely it is that companies not involved in the exchange can constrain any anticompetitive behaviour by the companies concerned.

The restrictive effect or otherwise of an information exchange is also determined by the characteristics of the market – for example, the Draft Guidelines refer to the fact that a transparent market facilitates a collusive outcome as the result of an information exchange.

Finally, the Draft Guidelines refer to the characteristics of the information exchange as another factor that determines whether or not that exchange has a restrictive effect. In this regard, the first relevant issue is whether the information exchanged is commercially sensitive. The Draft Guidelines identify price and quantity information (the latter relating to sales, market shares, territories or customer lists) as the most commercially sensitive, followed by information about costs and demand.

The Draft Guidelines also provide further guidance on the distinction between the exchange of public and non-public data (the former being acceptable, whereas the latter may not be). This distinction is important in practice, as companies accused of "pure" information exchange in particular often defend the conduct by arguing that the information was in the public domain. The Draft Guidelines now refer to the concept of "genuinely public information", which is defined as "information that is equally easy (ie costless) to access for everyone". On this basis, the Draft Guidelines appear to have limited the possibility for companies to defend their conduct by claiming it is public information. It will be interesting to see how restrictively the Commission interprets this concept in future cases.

Other important factors in the characteristics of the information exchange are the level of aggregation, the age of the data and the frequency of the information exchange.

Information exchange analysis under article 101(3) TFEU

Helpfully, the Draft Guidelines do acknowledge that there are certain situations in which information exchange can be justified because the conduct gives rise to efficiencies that fulfil the relevant criteria in article 101(3). As with most analyses under article 101(3), the most likely point on which the parties are likely to fail is "indispensability", and the Draft Guidelines suggest that – in order to meet the indispensability criterion – the type, level of aggregation, age, confidentiality and frequency of the information exchange must represent the lowest risk of restricting competition that is indispensable to creating the claimed efficiency. This will clearly require an analysis of the relevant facts on a case-by-case basis.

Examples

A very helpful feature of the Draft Guidelines are the nine practical examples at the end of the information exchange section – these are designed to illustrate the key points of the relevant guidance, and they complement the Draft Guidelines (which, by their very nature, are broad) very well.

Conclusion

Information exchange was an area of EU competition law that, while of considerable importance in practice, was subject to some uncertainty because the main Commission decisions on the topic were not recent and the Community courts had not yet had the opportunity to express their opinion on many important concepts within information exchange. So it is clearly helpful that the Commission has now published detailed guidance on the topic, although in some areas the Draft Guidelines are rather opaque, due to their attempt to explain concepts whose analysis is very fact-specific.

It will be very interesting to see how the Commission will use the Draft Guidelines in forthcoming cases, particularly in relation to potentially contentious areas such as "genuinely public information".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.