Roundtable discussion on competitor collaboration - 15 October 2009
Event programme (pdf 91kb)
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Collaboration and information flows between competitors can be beneficial. For example, they may foster innovation, allow the commercialisation of new products, enhance and speed up product development, and facilitate efficient sales and marketing or reduce distribution costs. They may also help to achieve Government public policy objectives (for example, social, health or environmental objectives) without the need for legislation or regulation. Generally beneficial collaboration is permitted by competition law - either it does not breach the prohibitions on anti-competitive agreements in the first place or it meets the criteria for exemption.
However, some types of collaboration between competitors are inherently harmful. They may prevent, restrict or distort competition, restrict innovation and/or limit economic growth. Harmful collaboration is prohibited by competition law.
It can sometimes be complex for businesses, Government policy makers and their advisers to decide whether a proposed form of collaboration would be permissible under competition law. This may result in some proposed pro-competitive collaboration and information exchanges not being taken forward for fear of infringing competition law.
On 15 October 2009, the OFT hosted a breakfast roundtable discussion on competitor collaboration. The event was organised to coincide with the ongoing review by the European Commission of the current regime for the assessment of horizontal cooperation agreements (the 'Horizontals Review'). [^ see Note 1]
Twelve speakers were invited to set out their views regarding competitor collaboration, and then to discuss those views with a range of participants including senior representatives and experts from business, Government, the European Commission, law firms, economic consultancies, academia and the OFT. The discussion was focused around two main areas where uncertainties about the scope of competition law have arisen - collaboration to achieve Government policy objectives, and information exchange - and whether additional guidance on these topics in the Commission's Horizontal Guidelines would assist businesses and policy makers. The discussion raised awareness of the difficulties that arise in practice and will inform the OFT in developing its views on the Horizontals Review.
Contact details for feedback questions
If you have any comments, feedback or questions regarding the roundtable discussion on competitor collaboration, please contact Chris Prevett (firstname.lastname@example.org or 020 7211 8641).
Note 1. The scope of the Horizontals Review includes Regulation (EC) No 2658/2000 on the application of Article 81(3) of the Treaty to categories of specialisation agreements (Specialisation Block Exemption Regulation), Regulation (EC) No 2659/2000 on the application of Article 81(3) of the Treaty to categories of research and development agreements (R&D Block Exemption Regulation), and guidelines on the applicability of Article 81 of the Treaty to horizontal co-operation agreements (Horizontal Guidelines). The Specialisation and R&D Block Exemption Regulations will expire at the end of 2010.
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Synopsis of event proceedings
This section briefly summarises a selection of personal opinions and observations expressed by individual participants at the breakfast roundtable discussion on competitor collaboration (please note that these do not necessarily reflect the OFT's views). They are grouped under five headings:
The legal framework
- Collaboration can have beneficial outcomes: helps companies fight costs and risks, pool expertise, lower prices, achieve a Government initiative. Not all collaboration is prohibited by competition law.
- Collaboration can also have anti-competitive outcomes (for example, cartels). In practice, agreements are complex. It can be hard (for self-assessing businesses/advisers) to identify whether an agreement has an anti-competitive object or has an anti-competitive effect. There is a general lack of recent legal precedent in this area.
- There is a need for more guidance on when pro-competitive collaboration is permissible under competition law. Competition law should not be used as an excuse for not entering into pro-competitive agreements.
- Member State Governments and competition authorities have responsibility for providing business with clear guidance and to lower the burden of compliance which is currently felt by businesses.
- General perception that the Horizontal Guidelines are satisfactory and helpful but require updating in line with modern thinking, the decisional practice of the European Commission and National Competition Authorities, and the recent EU and Member State case-law.
- More certainty is sought as to what businesses can and cannot do.
- However, businesses want to restrict the scope of the category of conduct that constitutes a restriction of competition by object (the case-law on horizontal collaboration could be interpreted as illustrating a trend towards a widening of this category).
What Government can do
- Government faces fiscal pressures to consider Government initiatives that encourage competitor collaboration, for example to achieve policy objectives. These can be very effective methods of Government intervention in markets to stimulate change.
- However, in difficult policy areas, particularly when competition law is used by businesses as a reason not to cooperate, Government may have to consider regulation or legislation. Legislation and regulation can be expensive, take time to implement, can have unintended consequences and is often difficult to change.
- Joined-up Government, and an appreciation of the competition law implications of policy initiatives by Government, should be encouraged.
- The Government is focusing on promoting an understanding of competition law amongst policy makers, officials and ministers.
- Government needs to work closely with the OFT at the early stages of the development of a policy, take a leading role regarding analysing the perceived or intended effects of a policy, and needs to consult external lawyers more often to produce rules for each policy that allay competition law concerns and encourage business participation.
- The OFT guide, produced with the Department of Business, Innovation and Skills, Government in Markets (pdf 591kb), addresses Government market intervention in detail. It provides useful practical information and specifically explains what Governmental actions may be problematic.
What businesses can do
- Involvement with Government-led initiatives can place opposing pressures on businesses: can feel at risk of breaching competition law, but refusal to be involved often leads to negative publicity.
- Customers are increasingly demanding transparency and industry-wide standards. These often necessitate some degree of collaboration.
- Businesses' input into the Horizontals Review, and into the OFT and Government measures that are being taken in this area, are to be encouraged and will be welcomed, in order to ensure that future guidance and policy address the issues that are arising in practice.
- Encourage policy officials and ministers to think actively about competition law issues in situations when they feel this is in conflict with requests for action - this will support the OFT's advocacy work.
What the OFT can do
- The OFT recognises the tensions between Government and businesses regarding the implementation of initiatives designed to achieve certain public policy objectives and the application of competition law. These tensions may be expected to continue.
- OFT considers the competition implications of the work of the Government in a number of ways, including the Competition Forum and consultations during the formulation of Government initiatives, and through competition advocacy work and the training of Government representatives.
- Businesses also expressed a desire for increased guidance from the OFT on specific proposals being considered, since general guidance inevitably did not cover all issues being considered.
- The OFT has listened to concerns expressed over the past year about the need for guidance on specific proposals being considered, in addition to enhanced general guidance. The OFT is proposing to trial a short-form opinion procedure, which would provide guidance on a novel or unresolved issue of wider interest arising in the context of a specific proposal within a short time period.
What the European Commission can do
- The public consultation process will be an important stage of the development of the revised Guidelines.
- The revised Guidelines should state expressly what is not allowed under competition law. General guidance would be welcomed by businesses on how best to prevent infringements from arising in the first place, and the examples given should reflect actual, modern business practices.
- Specific areas which could be developed in the Horizontal Guidelines include:
(i) The nature of the benefits that can be taken into account under the first limb of Article 101(3). For example, can wider policy objectives be considered, such as helping farmers or public health? Should the term 'efficiency gains' be expanded?
(ii) Who the benefit can accrue to under the second limb of Article 101(3). Often the benefits do not accrue to the direct/indirect consumer, for example, where the benefits arise to future generations of consumers.
(iii) Since competition authorities are prepared to question and revisit the counterfactual assessments of the parties, this area is fraught with risk for businesses.
(iv) The Guidelines should emphasise that Government-supported agreements are treated the same under competition law as other types of agreement.
(i) In the EU, there have been a number of examples of information exchanges which have been treated as evidence of a cartel.
(ii) There is a need for the Guidelines to establish a structure to determine which information exchanges are permissible under competition law, those which merit an effects-based analysis, and those which should be treated as object restrictions.
(iii) The Guidelines could introduce:
- Rebuttable presumptions to assist with the interpretation of the cases. For instance, if the exchange of information is freely and publicly available, not ancillary to cartel conduct and there is no evidence of anti-competitive intent, the guidelines could establish a presumption that (a) the information exchange is not restrictive of competition by object, and (b) is not restrictive of competition by effect.
- Guidance regarding the frequency of the exchange that is permissible.
- Guidance on how the structure of the market can determine the categorisation of information exchanges.