44/10    27 April 2010

The OFT has today issued its first advice under a new process allowing it to give firms clarity on certain competition law issues.

Under the Short-form Opinion process the OFT aims to provide guidance, within a prompt timetable, to businesses seeking clarity on how the law applies to prospective collaboration agreements between competitors which raise novel or unresolved competition issues.

In the first trial use of the process, grocery wholesalers Makro-Self Service and Palmer & Harvey have received guidance, following a request for clarification, on the competition implications of a proposed joint purchasing agreement. The OFT considers that the deal between the companies to secure better prices from common suppliers through a collective purchasing agreement is unlikely to restrict competition in the market.

Download the Short-form Opinion P&H/Makro joint purchasing agreement (pdf 124kb)

During its analysis, the OFT identified a concern that certain exchanges of information between the firms could potentially lead to a reduction in competition. However following OFT advice, the parties have agreed to ensure the data they supply to each other is general and aggregated, preventing either company from extrapolating specific or sensitive information.

The new process is being trialled in response to feedback from business that some potentially beneficial collaboration between companies is not proceeding due to concerns about infringing competition law, which carries civil and in some circumstances criminal sanctions.

The process involves parties submitting a statement of facts agreed between themselves. The OFT does not verify these for accuracy or completeness or carry out any market testing and bases its opinion on these 'assumed facts'. The OFT will consider requests from companies and will publish Short-form Opinions in order to provide wider guidance to a range of businesses or sectors. The Opinions will only be available for a limited number of cases per year, and the OFT will choose these cases by applying its usual prioritisation principles.

Jackie Holland, OFT Director of Competition Policy, said:

'This process is a straightforward and quick way of providing clarity on competition law to businesses planning innovative forms of collaboration. Though companies must still ensure for themselves that they are fully compliant with competition law, this provides an important means of giving clear advice to them and others in similar situations in the future. We hope that this process, developed in direct response to business concerns, will ensure companies are not prevented from undertaking legitimate and beneficial arrangements.'

See the Short-form Opinions page for further information.

NOTES

1. The OFT expressed the opinion that despite increased contact between P&H and Makro, the proposal was unlikely to reduce competition as the firms would not have the power to raise price/reduce output in the sale or delivery of products downwards in the supply chain to the food, service, catering and hospitality industry or food or grocery retailers. The OFT expressed the opinion that the proposal involving cheaper prices from a supplier may allow the companies to increase competition on price creating the benefit of lower prices for suppliers and consumers.
   
   
2. A non-confidential version of the full Short form Opinion in this case will be available on this website shortly (as soon as any redactions of confidential information are agreed between the OFT and the parties). Download a fuller explanation of the Short-form Opinion process (pdf 124kb).
   
   
3. The Competition Act 1998 (CA98) prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it. Its European counterpart, Article 101 of the Treaty of the Functioning of the European Union (TFEU), covers equivalent agreements or practices which affect trade between EU Member States. In addition, the Enterprise Act 2002 provides for the imposition of criminal sanctions where an individual dishonestly agrees with one or more others to fix prices or engage in certain other kinds of anti-competitive conduct.
   
   
4. The Short-form Opinion process falls within the OFT's general Opinions process. The Modernisation guideline sets out the circumstances in which the OFT will consider giving an Opinion and these general provisions also apply to Short-form Opinions. In particular, the OFT will consider issuing an Opinion where it takes the view that: there is not sufficient precedent in EU or UK case law, or decisions, practice or previously published opinions given by the European Commission's competition services or the OFT to answer the question posed; the OFT considers that there is a need for a published Opinion; and the Opinion can be prepared on the basis of the information provided.
   
   
5. The Short-form Opinion will provide guidance to requesting parties to facilitate their self-assessment of the compatibility of the proposed agreement with the relevant provisions of the CA98 and/or Article 101 TFEU. It is in the parties' interests to provide a statement of facts that is accurate, complete and not misleading in order to maximise the relevance of the guidance given in the Short-form Opinion to carrying out their self-assessment exercise. The Short-form Opinion will not reach any definitive conclusions on the application of Chapter I prohibition in the CA98 and/or Article 101 TFEU.