Nationwide Independent Bodyshop Suppliers Limited

Party: Nationwide Independent Bodyshop Suppliers Limited (NIBS)

Case closed: February 2009

Issue: Whether the arrangements between a joint selling association and its members infringe competition law

Relevant provision: Competition Act 1998, Chapter I

Case closure summary

In 2006, the OFT opened an investigation under Chapter I of the Competition Act 1998 (the Act) into the structure and operation of NIBS. NIBS is a joint selling/distribution organisation whose members are a number of local and regional suppliers of automotive paint and ancillary equipment.

NIBS negotiates contracts on behalf of its members with bodyshop chains who require national or regional distribution. NIBS also negotiates contracts for its members with car manufacturers and paint manufacturers to obtain 'approved distributor' status. It was alleged that these arrangements infringed the prohibition in section 2 of the Act (the Chapter I prohibition).

The OFT conducted a preliminary investigation of the NIBS arrangements relating to the negotiation by NIBS of supply contracts with bodyshop chains and 'approved distributor' status with car manufacturers.

The OFT's preliminary investigation suggested that the relevant market could be defined as that for the distribution of paint, consumable items and paint equipment for the automotive refinish market in the United Kingdom. The OFT did not reach a definitive view on this, however, and noted in particular that the nature of competition between national and regional sales on the one hand and local sales on the other may be markedly different.

NIBS argued that the arrangements were, if anything, pro-competitive insofar as they enabled NIBS members to compete with large competitors for national/regional contracts and to qualify for 'approved distributor' status that its individual members would not otherwise be able to compete or qualify for.

The OFT considered that, for the purpose of applying the Chapter I prohibition, NIBS' structure could be characterised as a commercialisation agreement and as a partial function, non-structural joint venture (JV). To determine whether the Chapter I prohibition had been infringed, the OFT considered that it would be necessary to have regard both to the formation of the JV itself and to the specific restrictions contained in the JV agreement.

1) As regards the formation of the JV, the OFT considered that the following factors would be relevant to determining whether this gave rise to an infringement of the Chapter I prohibition: whether NIBS members were actual or potential competitors, whether there were spill-over effects in related or unrelated markets and whether there was a network effect. However, detailed further work would be necessary in respect of each of these factors before the OFT could reach a conclusion on this point. In particular, further work would be necessary to establish whether, and if so to what extent, NIBS' members were actual or potential competitors in respect of the matters covered by the NIBS arrangements.

2) As regards the specific terms of the JV agreement, the OFT considered that it would need to determine first whether the restrictions in the agreement were necessary and indispensable (ancillary) to the JV – assuming, that is, that the formation of the JV itself did not infringe the prohibition - and, if not, whether any of them gave rise to an infringement. As with the formation of the JV, further work would be necessary for the OFT to reach a conclusion on these points.

In addition, even if either the formation of the JV or any of its terms were found to infringe the Chapter I prohibition, further work would be needed to determine whether the arrangements met the criteria for exemption under section 9 of the Act.

Before undertaking further work, the OFT carried out an assessment of the case by reference to its prioritisation principles and concluded that it was no longer a priority to continue to investigate the case. In particular, the potential consumer benefit in pursuing the case appeared to be limited, given the relatively small size of the market and NIBS' relatively modest share of that market. In addition, changes in the membership of NIBS following the start of the OFT's investigation meant that the anti-competitive impact of the arrangements (if any) would already have been reduced. The OFT also took into account the substantial resources which would be required to continue the investigation. In view of these facts, the OFT decided, following consultation with the parties, that it would not be an appropriate use of OFT resources to pursue this case and the case has now been closed.

Prior to the OFT's decision to close the case, NIBS gave a number of assurances relating to its future conduct [see Annexe]. [see note 1] The OFT had regard to these when deciding whether or not to proceed with the case. The OFT considered that the assurances would go some way to addressing any competition concerns arising from the NIBS arrangements but concluded that, even without the assurances, it would not be an administrative priority for the OFT to proceed with the case. The OFT's decision to close the case on the grounds of administrative priority is not, therefore, dependent on the assurances.

OFT's action: case closed
Case officer: louise.shaw@oft.gsi.gov.uk
Case reference: CE/7303/06
 
ANNEXE
Assurances given to the OFT by NIBS

(a) In accordance with NIBS' existing business practice, unless otherwise requested by the customer, NIBS will not agree a common price on behalf of its individual members, but will allow its members to negotiate the price for individual contracts with customers

(b) In accordance with NIBS' existing business practice, NIBS will make available to all customers via its web site the identity of all NIBS members and their depot locations

(c) When negotiating or dealing with a customer, if the customer requests, NIBS will provide details of those depots which can reasonably provide the services required, giving a minimum of two depots, listed from best placed to worst placed

(d) NIBS will not impose or enforce any unlawful restriction upon its members competing for the work of other members, and

(e) NIBS and its members will ensure that its promotional material is not inconsistent with the terms of these assurances.

NOTE

1. The provision of assurances is without prejudice to NIBS' contention that its arrangements do not infringe the Act and does not constitute an admission of liability by NIBS or its members. 

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