The Romanian Competition Council (RCC) published for public consultation on its website on 28 October 2019 its draft Guidelines on competition law compliance by associations of undertakings (Guidelines). Suggestions and proposals on the draft are expected until 25 November 2019 using the contact details indicated by the RCC. The full text of the Guidelines is available in Romanian language.
The Guidelines represent the latest piece of multiple such endeavours of the RCC in recent years. As such, the RCC adopted a pre-emptive stand as regards competition law compliance coming towards the business environment with such papers aimed at highlighting the authority’s standard in various fields, by publishing e.g. Guidelines on complying with competition rules when taking part under a form of association in public procurement procedures, Guidelines on detecting and discouraging anticompetitive practices in public procurement procedures, Guidelines on complying with competition rules (mainly setting down the rules for implementing an effective internal competition compliance program by undertakings) or Guidelines on the incidence of State aid rules to the financing of sports activities.
Specifically concerning the activities of professional associations, it should be noted that the Guidelines have been drafted in the context of several RCC investigations regarding potential competition law violations committed under the umbrella of professional associations. Hence, there has also been a request from the business environment towards the publication of clear rules evidencing the RCC’s approach regarding the activity of professional associations.
It should also be noted that the RCC had already shown interest into this topic before as it published in 2013 its Guidelines into joint petitioning by undertakings or associations of undertakings (available in Romanian language), following one of its investigations that also concerned the activity of certain trade associations. Also following an RCC investigation into the insurance market, the RCC confirmed that using a black box mechanism for exchanging information within the association was in line with competition rules.
Moreover, the Guidelines appear in a context of growing concern and scrutiny from national competition authorities in the European Union as regards the activities of professional associations. In this regard, it should be noted that the Belgian Competition Authority also published on 6 October 2019 its Guidelines on the exchange of information within professional associations (available in French language).
2. Scope of the Guidelines and rules applicable to associations of undertakings
The RCC drafted the Guidelines with the goal of raising awareness on competition rules, how these would apply considering the specific context of professional associations and to offer practical advice in this regard.
The RCC highlights the risk for competition law violations considering regular meetings between competitors in the context of a professional association’s activities. The RCC is aware that these meetings are necessary for accomplishing the association’s goals, but they should not aim at or lead to the coordination of the commercial behaviour of the association’s members.
As professional associations have frequently been a source of anticompetitive behaviour, the RCC believes that they could also be a good channel for disseminating competition law compliance knowledge. In this regard, the Guidelines recommend associations of undertakings to (i) draft and implement their own competition compliance manuals; (ii) ensure such manuals reach all members of the association or (iii) establish ethical standards for members.
The Guidelines highlight that any action or decision of an association of undertakings reflecting the intention of coordinating the behaviour of its members or that restricts or distorts competition is strictly forbidden. The decisions do not have to be formal, mandatory or respected by all members, a considerable effect on competition being enough.
The RCC further emphasizes that consequences of a competition law violation may occur even when only a potential effect may be identified. Therefore, for a competition breach to exist, it is not important if the breach is the result of negligence or bad faith and not knowing the law cannot be used as a defence.
3. Main types of anticompetitive behaviour involving professional associations
The Guidelines stress that associations usually act as participant or initiator of a cartel or may have the role of facilitating the creation and functioning of a cartel. Moreover, associations of undertakings may also lead to anticompetitive vertical restrictions (e.g. in the case of trade associations representing undertakings active in multiple segments of the same industry).
The Guidelines further distinguish between “clear prohibitions”, considered similar to cartels, and “sensitive activities” that need to be analysed on a case-by-case basis, considering the effects they may have.
3.1 Clear prohibitions
Under “clear prohibitions” the Guidelines address price fixing, market or customer sharing, bid rigging and limiting production and/or sales.
(a) Price fixing
- Fixing by an association of undertakings, directly or indirectly, of the price/rate/fees of the products of services provided by its members is capable of significantly restricting competition on the market they are active on. The situations would be similar if the association only provides the framework for the price fixing behaviour, acting as facilitator;
- The prohibition of price fixing also covers coordinating the association members regarding other price components such as discounts, bonuses/premiums, surcharges, certain costs, profit margins or other commercial terms and conditions applied by members;
- Establishing a minimum, maximum or recommended price or limiting the members’ freedom of independently setting prices (such as certain intervals or percentages by which the price may be lowered or increased) may have similar effects to price fixing;
- Therefore, the association must take the necessary measures to allow its members to make independent decisions, despite any recommendations issued by the association.
b) Market or client sharing
The RCC provides a few examples of such behaviour:
- individual clients/groups of clients/exclusive commercial territories being allocated between members of the association;
- each member of the association specializing in fabricating certain products or certain components of a product;
- members agreeing on conditions or a schedule of allocated markets together with exports schemes for selling excess products.
c) Bid rigging
- The Guidelines highlight bid rigging as another form of market sharing and/or of price fixing.
- For such an unlawful behaviour an active collaboration between the tender participants is necessary. The Guidelines provide the following example: the association may function as a registrar’s office, collecting information, for instance regarding the offered prices, then disseminating the information to its members through a previously agreed methodology, hence facilitating its members’ breach of competition rules.
d) Limiting production and/or sales
- Any action or decision of an association of undertakings limiting production and/or sales or imposing production and/or sales quotas can lead to the reduction of product/services supply leading to a price increase for consumers.
3.2 Sensitive activities
Under the Guidelines, sensitive activities as those activities that may appear while conducting legitimate actions and these must be analysed on a case-by-case basis considering their market effects. Hence, such activities may or may not be in breach of competition rules depending on many factors.
According to the Guidelines, “sensitive activities” include potentially problematic aspects that could be included in technical standards and certification systems, recommendations of associations of undertakings, boycott behaviour, codes of conduct or best practices issued by the association, information exchange within the association, conditions for being granted membership to the association, press releases or aspects addressed during meetings of the association.
a) Technical standards and certification systems
- While technical standards and certification systems usually ensure a better quality of products and services and therefore benefit consumers, such standards should not be used as entry barriers to the market or to exclude competitors;
- Specifications of the standards should be accessible to the public and, hence, available to undertakings that are not members of the association;
- Awarding certificates or seals of approval is allowed as long as these are based on objective and legitimate criteria and applied on a non-discriminatory basis.
b) Recommendations of an association of undertakings
- Recommendations of associations, even though not mandatory, may still fall under competition rules when they influence the members’ commercial behaviour regarding aspects that affect competition (e.g. prices, discounts, profit margins etc).
c) Resorting to boycott
- This could take the form of communications of the association inciting its members or even clients not to buy products/services of certain undertakings, or their suppliers not to deliver to certain undertakings.
d) Codes of conduct and best practices issued by associations of undertakings
- Codes of conduct and best practices of associations are generally beneficial to consumers. However, such documents may also include restrictions affecting competition (e.g. rules limiting the marketing and promotion activities of members).
e) Information exchange within associations of undertakings
- Associations of undertaking should not be used as a forum for exchanging commercially sensitive information (e.g. volumes, sales, market shares, production capacity, prices and price components, client details and sales territories, outstanding orders, market forecasts or business and marketing strategy, information of tenders won etc.) between its members;
- Activities of collecting individual member data and preparing market analysis or benchmarking reports should be conducted by an independent third party under a confidentiality commitment.
f) Becoming member of an association of undertakings
Becoming member of an association must not be used as a mechanism in breach of competition rules and such procedure should be clearly provided in the association’s statute. The Guidelines include details on the adherence to an association of undertakings:
- Adherence must be voluntary;
- Adherence criteria must be clear, objective, non-discriminatory, legitimate, reasonably necessary to accomplish the association’s purpose and should be focused rather on quality than quantity aspects;
- Any undertaking active in the given economic sector should have the possibility of becoming a member of the association;
- Any proposal of rejection of an adherence request, or of excluding a member should be based on objective criteria;
- Gaining membership should not involve any restriction of individual publicity or promotional activities.
g) Press releases, information letters and memos on market/industry evolution
- Wording that may be interpreted as aiming to coordinate the behaviour of members or representing an agreement between them to counteract market evolutions should be avoided.
- The association must ensure that any press releases, information letters or memos issued describe market evolution in an objective manner.
h) How meetings within the association take place
The Guidelines include details on organizing and carrying out meetings without breaching competition rules:
- There should be an association employee tasked with organizing the meetings that sends members official invitations together with the proposed agenda;
- Business points to be discussed should be listed as detailed as possible and should not contain any questionable aspects from a competition law standpoint;
- At the beginning of every meeting, participants should be instructed on the behaviour to be adopted in order to avoid breaching competition rules. If during a meeting sensitive aspects are being addressed, the person responsible with organising the meeting should intervene and suspend or cease the discussions;
- During the meetings, the presence of a legal adviser or competition law expert is recommended so they can intervene in case of discussions that risk breaching competition rules;
- Resolutions adopted during association meetings should also be recorded in the minutes. The minutes should be disseminated to all members shortly after the meeting.
4. Compliance programs
Under this point, the Guidelines refer to the RCC’s Guidelines on complying with competition rules (available in Romanian language here), also applicable for associations of undertakings. The paper further highlights the main steps in implementing a compliance program:
- Identifying and analysing the specific competition risks;
- Planning and establishing a compliance program;
- Implementing the compliance program and conducting training;
- Monitoring and reviewing the program’s implementation.
5. Other practical advice for associations of undertakings under the Guidelines
- Make sure all members are well informed that the association requires and enforces a strict compliance by its members with competition law (through the association’s statute);
- Establish an internal policy (compliance manual, ethical code etc.) on competition law compliance known by all members;
- Make sure the statute of the association does not include anticompetitive provisions;
- Make sure that the adhesion criteria is transparent, proportional, non-discriminatory and based on objective standards;
- Make sure that adequate measures are implemented to prevent any exchange of commercially sensitive information between members or towards them – do not request members to provide to the association sensitive information such as details on prices, volumes, market shares or the intention to exit the market;
- A periodic review of the association’s internal documents, policies, procedures as well as publications (including its website) to ensure that these do not contain data contrary to competition rules;
- Contracting an independent third party of collecting and aggregating data for generating market statistics;
- Ask members to leave any meetings with competitors where commercially sensitive information is discussed and report this to the association and to the RCC;
- Consult a legal counsel or competition law expert whenever in doubt regarding the association’s compliance with competition rules;
- Do not allow that topics not included on the agenda are discussed during association meetings and ensure that the minutes reflect all matters addressed;
- Make sure that the association does not impose to members obligations that would restrict them from making commercially independent decisions;
- Do not stop members from applying commercial conditions different from the ones recommended by the association and do not force them to collaborate or not with certain market players;
- In case the association has
information about a possible competition breach by its members, the
Guidelines recommend to:
- Communicate such concerns to the members of the association, request them to immediately stop and record such request; and
- Immediately contact a lawyer/legal counsel.
- In case the association had acted in breach of competition rules, the Guidelines also refer to the options under the RCC’s leniency policy (i.e. applying for leniency) or settlement procedure (i.e. acknowledging the breach in exchange for a reduction of the fine).
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.