28 November 2022

When Partners Become Competitors — Market Sharing In Storage Management And Barcodes

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Later the two shareholders each chose to establish new companies, which would be active in the same markets as QBS.
Denmark Corporate/Commercial Law
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The Danish Competition Council ("DCC") has in a recent decision found that the storage management companies Codeex ApS ("Codeex") and Barcode People ApS ("Barcode People") have infringed the Danish Competition Act by engaging in sharing of markets and customers between them in the market for storage management (i.e. data capture and barcode scanners).

Originally, two shareholders of a jointly owned company, QBS ApS ("QBS"), had agreed on an internal division of customers and sales into their respective "departments" of QBS. The shareholders shared the profits of QBS between them.

As a part of this internal division, the two shareholders had agreed that they would not directly or indirectly carry out work, employ, enter into business relations with or otherwise have business contacts with customers with whom the other shareholder had contact with within the previous three years.

Later the two shareholders each chose to establish new companies (Codeex and Barcode People, respectively), which would be active in the same markets as QBS. Shortly after these companies had been established, QBS went out of business and subsequently bankrupt, and each shareholder continued their respective commercial activities in their newly established, separate companies.

Nonetheless, the partnership contract of QBS, stipulating that the shareholders should not contact "each other's customers" continued to apply to the shareholders after each of them had set up new competing companies. In order to ensure that the agreement remained in force, the parties made a list of which customers belonged to each of the parties.

Later, following the bankruptcy of QBS, the parties entered into a settlement agreement due to various disputes in relation to QBS. As part of this settlement agreement it was agreed between the parties that their customer sharing agreement would remain in place for a further two years between Codeex and Barcode People.

The partnership contract and the subsequent settlement agreement were considered by the DCC to constitute one continuous infringement in the form of a market and customer sharing agreement, having a duration of more than three years.

In its investigations the DCC found several emails demonstrating that the parties did in fact keep the customer sharing agreement in place, and frequently discussed who was allowed to approach specific customers.

Interestingly, both the partnership contract and the settlement agreement were drafted in close cooperation with the parties' lawyers. Furthermore, the lawyers advised the parties on the customer sharing agreements and how to best adhere to this. This led the DCC to issue a press-release in which they highlighted that lawyers must always take competition law into consideration, when advising on contracts regulating competitive relationships between independent companies.

The DCC is currently proceeding with the case with the aim of issuing fines to Codeex and Barcode People.

The decision by the DCC is accessible here (in Danish).

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.

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