Regulating trade associations in Europe
From past trends to a sustainable future
France
The French Competition Authority (“FCA”) has a strong track record of pursuing and sanctioning trade associations and their member in particular in the context of cartels or information exchanges cases. This trend is not expected to decrease soon. Not only France has recently transposed the ECN+ directive but also, the FCA has published a report reminding to trade associations the limits of their role in light of competition rules. As far as sustainability is concerned, despite some positive messages, it is also expected that the FCA will focus more on greenwashing practices than legitimate cooperation.
(a) Tougher enforcement expected in France toward trade associations
In 2016, a study showed that in 41% of cases, French cartels are French cartels were eased by the existence of a trade association. When the cartel has more than 10 players, this proportion rises to 64%, and in 100% cartels with 14 or more players benefited a trade association intervened (see here). Other interesting number: between 2001 and 2020 we have identified not least than 36 cases investigated by the FCA and involving a trade associations and 14 opinions issued by the FCA. The focus of the FCA remains on price fixing cartels (Alsace Wine trade associations in 2020 and 2018, Architects in 2019, Floor covering cartel in 2017, Model agencies in 2016, etc), boycotts (Dentists in 2020 and 2012, Bailiffs in 2019, etc.), discriminatory membership (Transport in 2019, Martinique meat, cattle and milk sector in 2018, Press publishers in 2005, etc.) amongst others anticompetitive practices. The enforcement climate is therefore historically high in France and a number of recent developments in France are clear indicators of an increased enforcement risk as far as trade associations and their members are concerned.
First, the publication by the FCA in September 2021 of a dedicated 178 pages report (see here) on trade associations and competition law. While the FCA acknowledges that trade association have an important role to play, this report also recaps the FCA’s past decisions involving in trade associations and strongly emphasises on antitrust risks attached to trade association activities (price fixing, information exchange or concerted practices). This report aims at promoting compliance by trade associations but was interpreted as strong signal that trade associations and their members are under the spotlight as far as competition rules are concerned in France.
Second, the transposition of the ECN+ Directive in France drastically increases the financial exposure of trade associations and their members. Order n°2021-649 of 26 May 2021 incorporates the key changes mentioned above regarding increased financial penalties and members’ financial responsibility where the association is not solvent. These principles are now codified under Article L. 464-2 of the French Commercial Code. Only limit to the members’ responsibility is where the undertakings can demonstrate that they did not implement the infringing association decision and were unaware of its existence or actively distanced themselves from this decision before the initiation of the procedure by the FCA.
Beyond these changes concerning trade associations, undertakings will also see their individual financial exposure increasing with the alignment of the French method to calculate fines with that of the European Commission. Our calculations in real life cases show that this change with dramatically increase undertakings individual financial exposure. Financial exposure there becomes a real concern in France for undertakings both individually but also as members of trade associations.
Finally, the focus on trade associations and their members is also highlighted in the FCA’s recent guidelines on compliance programs published on 24 May 2022. In this document, the FCA acknowledges the increased financial exposure following the ECN+ Directive transposition. It also emphasises clearly the role trade associations as far as compliance with competition is concerned. In particular, while they can play an important role in disseminating good practice to their members and in providing guidance on compliance, it also makes it clear that it is the duty of these associations to take all necessary measures to conduct their activities in accordance with the competition rules.
(b) What about sustainability objectives?
Trade associations are at the forefront in a context of momentous acceleration of the low carbon transition and high expectations and pressure on undertakings to adapt their business model, their supply chain and products in light of French and European green objectives. While certain discussions are legitimate, others are high risk areas. Trade associations and their members should therefore be very careful when discussing sustainability related topics.
In terms of enforcement, the FCA’s approach has been balanced at this stage. On the one hand, the FCA has shown some degree of flexibility toward agreements promoting sustainable objectives. The authority is a part of a broader task force between regulators in France to better take into account this topic and has also an internal task force dedicated to sustainability where case handlers will develop specific analysis and will be available to guide undertakings if they need to come forward with respect to certain legitimate projects. To illustrate this flexibility, Isabel de Silva, former President of the FCA (now replaced by Benoit Coeuré) indicated during a talk in November 2020 that the FCA did not open an infringement procedure against candy manufacturers that agreed to ban the use of titanium dioxide in the production of candy (available here, 26:45).
On the other hand, the FCA also made it very clear that it would pursue greenwashing initiatives or cartels undermining sustainability objectives. At this stage the relevant case law remains very scarce. Only one case is regularly mentioned in this respect by the FCA: the floor covering cartel of October 2017. In context of a broader and more traditional price fixing cartel, the FCA sanctioned an agreement between the cartel members concerning their products environmental performances (see here). Interestingly, this cartel involved a trade association (SFEC) showing that these organisations can indeed facilitate anticompetitive behaviours.
Undertakings should therefore watch this space both in terms of opportunities to come forward to the FCA in case they need guidance from the dedicated task force but also in terms of risks as far as illegitimate conducts are concerned, in particular in the context of trade associations initiatives.
General
(a) What is the ECN+ Directive?
The ECN+ Directive (Directive (EU) 2019/1 or the “Directive”) was signed into law on 11 December 2018 with the aim to strengthen the powers of National Competition Authorities (“NCAs”) to make them more effective enforcers and ensure the proper functioning of the internal market. It had to be transposed by the Member States into their national law by February 2021.
The Directive was introduced to fix certain shortcomings of NCAs including, amongst others:
In addition to filling these gaps, the Directive also aims at enhancing the cooperation between NCAs across the EU particularly in relation to dawn raids, cross-border enforcement of decisions imposing fines and the role of national administrative competition authorities (“NACAs”, i.e., administrative authorities designated by a Member State to carry out some or all of the functions of an NCA) before national courts.
Please also see Linklaters’ other publications on the implementation of the ECN+ Directive in France, Belgium, Germany and Italy (lexology).
(b) How does the Directive affect trade associations?
The Directive directly impacts trade associations in a number of ways.
The EU’s tougher stance on trade associations clearly signal its determination to penalise these bodies when they have a key role in anticompetitive practices, which is aligned with the Directive’s overall objective of creating a more effective regulatory environment in Member States.
(c) Trade associations and sustainability – what’s the link and where do we go from here?Germany
In Germany the ECN+ Directive was transposed into national law on 19 January 2021 through the 10th amendment to the German Competition Act (“GWB”), introducing changes for the liability of associations of undertakings regarding both the absolute amount of the fine and the possibilities of recourse of associations from their members. This is set out in more detail in section 1 above and this article on the implementation of the ECN+ Directive in Germany.
(a) Enforcement trends against trade associations and their members
The German Federal Cartel Office (“FCO”) has imposed less fines on business and associations in recent years for cartel breaches – these decreased from a total of EUR 848 million in 2019/20 to EUR 349 million in 2020/21. In addition, as a number of decisions show, the FCO has also recently exercised its discretion not to impose a fine on trade associations, depending on their discretion in the case at hand. For example, in 2020 the FCO imposed fines amounting to a total of approximately EUR 157 million on eight wholesalers of plant protection products and their seven responsible employees for entering into agreements. But the proceedings against three other companies and two associations were abandoned for discretionary reasons.1 In another case, the FCO imposed fines totalling around EUR 100 million on German car manufacturers for anticompetitive practices in the purchase of long steel products which took place under the umbrella of the German association for steel and metal processing. However, the FCO terminated the investigations against the industrial association for discretionary reasons.
However, at the end of 2021 Andreas Mundt, President of the FCO, stated that: “In the last two years we were a little restricted in our cartel prosecution activities by the pandemic. Under such circumstances it is not easy to push ahead with proceedings which rely on dawn raids of business and private premises or hearing witnesses to gather evidence. We are ready to initiate further proceedings next year. There is also new information to suggest that cartels, unfortunately, are not going to go away.” Businesses and trade associations, therefore, should expect more enforcement action in the future.
In light of the recent initiative to proceed against medical aids associations for coordinated price increases to the detriment of health insurance companies, and the introduction of new powers to fine trade associations as a result of the ECN+ Directive, this may be an indicator that the FCO will have a closer look on trade associations and their practices. This is also supported by the fact that the FCO has recently reserved the right to initiate another proceeding against an association in the field of furniture purchase depending on its future activities in the market (after it closed a related proceeding at the beginning of 2022). This comment could mean that the FCO is well aware of the influence of these associations on competition and will pay closer attention to their role in maintaining a functioning competition in the future.
Regarding trade associations, the FCO also stated that demanding special rebates (“wedding rebates”, “integration bonuses”, “concentration bonuses”, etc.) from suppliers is becoming a frequent phenomenon following the acquisition of smaller competitors or mergers between trade associations in the trading sector. These demands can raise competition concerns if the new company or the new association has a powerful or even dominant market position and “no objectively viable service” is offered in return (e.g., additional exhibition space or guaranteed listing). In many cases such demands are even made during a business year within the framework of ongoing supply contracts, which means manufacturers have to worry about their products being de-listed in the following year if they do not agree to grant a special rebate.2 With respect to sport associations, the FCO stated that rules of any sport association such as those imposed on athletes by the DOSB or IOC are also generally subject to national and international competition law insofar as they refer to economic activities.3 However, this does not apply if they serve legitimate objectives and are thus proportionate to the legitimate objectives pursued (see here).
(b) Sustainability initiatives and cooperation
In January 2022, the FCO has concluded the examination of two separate business cooperations and sustainability initiatives: (i) an initiative to introduce living wages in the banana sector and (ii) the expansion of the animal welfare initiative to include cattle fattening. These reviews form part of an initiative of the FCO to advise businesses on cooperations and provide guidance especially on how to ensure that sustainability strategies are embedded in competition law.
Regarding the initiative to introduce living wages in the banana sector, the FCO was clear that no information on procurement prices, other costs, production volumes or margins should be exchanged. Nor that compulsory minimum prices or surcharges should be introduced at any point of the supply chain. Meanwhile, regarding the animal welfare initiative, the FCO stated that the agreement reached between the businesses on paying a standard premium was tolerated for a transitional period due to the project’s pioneering nature. However, competition elements must gradually be introduced.
These cases show that the FCO is ready to work with businesses to achieve sustainability goals and think out of the box in order to do so. To that effect, Andreas Mundt stated that: “Competition law does not stand in the way of cooperations for achieving sustainability objectives – on the contrary. Effective competition is part of the solution since sustainability requires innovation, which in turn only emerges in a competitive environment. If a cooperation impedes competition it must be assessed under competition law. However, our work with various initiatives has shown that competition law is flexible enough to support sustainability initiatives especially in setting common standards while making sure that the conditions are fair and transparent. But there are also limits to this. Cooperations have to genuinely improve sustainability and must not only aim to increase the margins of a few companies.”
Italy
Poland
Despite the expiry of the transposition period for the ECN+ Directive on 4 February 2021, in Poland the legislative procedure aimed at implementing it is still ongoing. Currently, the draft law is still being reviewed within the governmental structures which is the stage prior to the submission of the draft to the parliament.
(a) Recent enforcement against trade associations
The enforcement of competition law by the Polish Competition Authority (“PCA”) against trade associations concentrates on price fixing, which usually takes the form of resolutions and other documents by trade associations that impose minimum or fixed rates for goods or services provided by the associations’ members. However, anticompetitive behaviour by the association does not need to be formalised – this includes both formal and informal decisions of associations as well as non-binding guidelines, recommendations and directives of the trade association. Unfortunately, the PCA has not issued any specific guidance to trade associations to this date.
Business sectors where price fixing has taken place and the respective trade associations were fined include, among others – tax consultancy4, photojournalism5, tourism6, real estate7, taxi transport8, surveying9 and agriculture10. Moreover, the PCA has fined professional associations of architects and urban planners11 for breaches of competition law. The fines imposed in aforementioned cases amounted up to PLN 215,000 (EUR 55,702)12.
Other anticompetitive arrangements within trade associations condemned by the PCA concerned, amongst others, the Polish Chamber of Physicians’ prohibition of prescribing homeopathic medicines13 and the National Council of Notaries’ requirement for a notary to obtain the consent of the local chamber council to open an office in a building that already houses another notary office14 or restriction to participate by the notaries in public tenders15.
In a recent decision, arrangements regarding participation in tenders and information exchange within a bespoke internet platform of the Marketing Communication Association (“SAR”), an entity associating marketing agencies involved in the development and delivery of promotion and advertising services, were found by the PCA to be anti-competitive practices16. However, SAR was not fined as it offered the PCA commitments pursuant to which SAR was obliged to amend its ethics code, official documents and agreements so as to underline that the decision to participate in a tender is always an individual and autonomous one for a participating agency. Moreover, SAR was obliged not to disclose information on tenders to its members unless this was publicly available.
No cases with a sustainability element yet
So far, there have been no cases before the PCA with a sustainability element or combining a sustainability topic with the involvement of a trade association.
Spain
Most of the ECN+ Directive’s content was already part of the existing Law 15/2007, 3 July 2007, on the Defence of Competition (“LDC”). Initially, both the Ministry of Economic Affairs and Digital Transformation and the Spanish competition authority (“CNMC”) proposed taking advantage of the transposition procedure to carry out a comprehensive review of the LDC, in force since 2007. The aim was not just making the few technical updates required by the ECN+ Directive, but rather updating some procedural provisions. However, the Spanish government ran out of time and finally had to limit the amendments of the LDC to those strictly required to transpose the ECN+ Directive, in order to avoid an infringement of its transposing obligations.
With regard to trade associations, the former Spanish competition authority (the Comisión Nacional de la Competencia, former authority to the current CNMC) in 2009 published a guide of conduct (the “Guide”) which has not been updated ever since. The Guide offered business associations guidance on how to avoid engaging in anticompetitive conducts. The Guide addresses some broad questions on the applicability of competition law to trade associations and gives some insight in relation to the following practices: decisions and recommendations on pricing, market sharing and other trading conditions; boycotts; exchange of information with member companies; advertising; standardisation and standard contract.
(a) Enforcement trends against trade associations and their members
There are a number of cases in which trade associations have been sanctioned in Spain, showing regular focus on their conduct by the CNMC. A selection of these cases, some of which refer to more complex or less common infringements, have been summarised below.
Case
S/DC/0619/17 Framework Agreement on Stowage
Summary
In 2020, the CNMC imposed fines totalling EUR 77,000 to a business association and six unions for antitrust practices in the market for providing port cargo handling services. The infringement took place in the context of the amendment 4th Framework Agreement on Stowage, signed between stevedoring companies and trade unions, to reflect certain regulatory changes that sought to liberalise stevedoring services. In each Spanish port there is a company managing port workers (in Spanish, Sociedades Anónimas de Gestión de Trabajadores Portuarios or “SAGEPs”), which traditionally hired and made available those workers to stevedoring companies. However, the new regulation allowed companies to withdraw from the SAGEPs.
The anticompetitive practices found by the CNMC involved imposing severe conditions on those companies that opted to exercise their right to withdraw from the SAGEP, thus undermining the liberalising purpose of the new regulation. This case is relevant because competition law was deemed applicable to a workers’ collective bargaining agreement. The CNMC stated that such terms penalized cargo handling companies and went beyond strictly labour-related conditions. However, the final sanction imposed to the signing entities was only symbolic as the CNMC considered that the parties showed a clear will to reach a new non-restrictive framework agreement.
Case
S/DC/0594/16 ANELE
Summary
On 30 May 2019, the CNMC fined 34 textbook publishers, as well as the National Association of Book and Teaching Materials Publishers (Asociación Nacional de Editores de Libros y Material de Enseñanza, “ANELE”) for coordinating commercial policies by adopting a code of conduct which regulated commercial practices as well as reaching agreements regarding the commercialization of digital books. ANELE’s code of conduct regulated the offering of gifts to educational centres (including computers and other materials), with the aim of reducing competition in the prescription of textbooks. In addition, there was evidence of ANELE threatening publishers that did not comply with the rules adopted in the code of conduct. As a result, ANELE was fined EUR 180,000 and 33 publishers were fined EUR 32.2 million in total.
The CNMC found that ANELE also facilitated collusion regarding the commercialization of digital books, since certain members of the association reached agreements to set prices and commercial conditions. The CNMC imposed a EUR 130,000 fine to ANELE and fines totalling ca. EUR 1.4 million to ten publishing companies which participated in this conduct.
Case
S/DC/0558/15 ACB
Summary
In 2017, the CNMC fined the Spanish Basketball Clubs Association (“ACB”) EUR 400,000 for imposing disproportionate, inequitable and discriminatory economic-administrative conditions on basketball clubs being promoted to the first division, but which had not previously been members of the association. The CNMC considered that these agreements prevented the promotion of several clubs to the ACB League and also damaged the newly promoted clubs’ ability to compete, as they had to make very significant financial efforts and were at a disadvantage when hiring players and making other investments.
(b) No current links between trade associations and sustainability
We are currently not aware of any Spanish case involving a trade association with a sustainability element. However, the CNMC’s Strategic Plan for the years 2021-2026 pursues several objectives amongst which, according to the statement made by Cani Fernández, president of the CNMC, the authority intends to take into account sustainability and environmental factors as well as social policies when assessing the application of competition rules. More specifically, SDG objectives (Sustainable Development Goals) will be deemed a priority for the upcoming years in light of the framework provided by the EU Green Deal. In this context, the CNMC submitted a Position Paper17 on competition policy to the European Commission which supports the Green Deal.
UK
The UK is no longer an EU Member State and, on that basis, has not needed to implement the Directive into domestic law. Nonetheless, the UK’s Competition and Markets Authority (“CMA”) is arguably one of the most active competition authorities in Europe and has in recent years published guidance on both trade associations and sustainability.
(a) Looking towards the future – CMA guidance on trade associations and sustainability agreements
While there haven’t been many recent cases in the UK involving trade associations and none of these seem to have a direct sustainability angle (see more on this below), the CMA has been busy publishing guidance on sustainability agreements. The CMA guidance from 27 January 2021 on “Environmental sustainability agreements and competition law” (“CMA Guidance”) expressly mentions trade associations due to their central role in facilitating standard-setting agreements, by which businesses set standards on the environmental performance of products, production processes, or the resources used in production.
Below you can find some of the Dos and Don’ts for businesses and trade associations when setting sustainability standards contained in the CMA Guidance.
Allow stakeholders to inform themselves effectively of upcoming, on-going and finalised standardisation work in good time at each stage of the development standard.
In addition, the CMA Guidance cautions businesses against using sustainability agreements as cover for cartel behaviour or including “by object” restrictions as agreements containing these cannot benefit from block / individual exemptions or safe harbours. Businesses are also reminded that whilst sharing competitively sensitive information with third parties, such as trade associations, may be acceptable, trade associations must be careful not to disclose received individualised information back to businesses competing on the market and not to use it to facilitate coordination between competitors.
That being said, the CMA, in its “Environmental sustainability and the UK competition and consumer regimes” advice to the UK Government published on 24 March 2022, has also proposed to launch a Sustainability Taskforce that is expected to develop formal guidance across the CMA’s functions – and will be worth keeping an eye on for developments!
Please also see Linklaters’ other publications on the CMA Guidance and the CMA’s advice to the UK Government regarding sustainability.
(b) Recent cases and CMA guidance regarding trade associations
As mentioned above, there aren’t many recent cases in the UK involving trade associations and none of these seem to have a direct sustainability angle. The most recent case (1379/5/7/20, Kerilee Investments Limited v International Tin Association Limited) is a standalone competition damages claim currently before the Competition Appeals Tribunal (“CAT”) brought by Kerilee Investments, a metal trader, against the International Tin Association, a UK based trade association. The claimant alleges that the trade association abused its dominant position and engaged in anti-competitive agreements in two interrelated markets: the market for certain responsibly produced and supplied minerals and the market for accreditation and standardisation of producing and supplying such minerals.
In 2018 the CMA also published case summaries of its recent decisions involving trade associations, together with a one-pager of Dos and Don’ts for Trade Associations and a brief video on information-sharing rules for businesses. These short publications were meant to supplement the Office of Fair Trading’s (“OFT”) (one of the CMA’s predecessors) 2004 Guidance on trade associations, professions and self-regulating bodies, which was much more extensive.
US
The UK is no longer an EU Member State and, on that basis, has not needed to implement the Directive into domestic law. Nonetheless, the UK’s Competition and Markets Authority (“CMA”) is arguably one of the most active competition authorities in Europe and has in recent years published guidance on both trade associations and sustainability.
(a) Looking towards the future – CMA guidance on trade associations and sustainability agreements
While there haven’t been many recent cases in the UK involving trade associations and none of these seem to have a direct sustainability angle (see more on this below), the CMA has been busy publishing guidance on sustainability agreements. The CMA guidance from 27 January 2021 on “Environmental sustainability agreements and competition law” (“CMA Guidance”) expressly mentions trade associations due to their central role in facilitating standard-setting agreements, by which businesses set standards on the environmental performance of products, production processes, or the resources used in production.
Below you can find some of the Dos and Don’ts for businesses and trade associations when setting sustainability standards contained in the CMA Guidance.
Allow stakeholders to inform themselves effectively of upcoming, on-going and finalised standardisation work in good time at each stage of the development standard.
In addition, the CMA Guidance cautions businesses against using sustainability agreements as cover for cartel behaviour or including “by object” restrictions as agreements containing these cannot benefit from block / individual exemptions or safe harbours. Businesses are also reminded that whilst sharing competitively sensitive information with third parties, such as trade associations, may be acceptable, trade associations must be careful not to disclose received individualised information back to businesses competing on the market and not to use it to facilitate coordination between competitors.
That being said, the CMA, in its “Environmental sustainability and the UK competition and consumer regimes” advice to the UK Government published on 24 March 2022, has also proposed to launch a Sustainability Taskforce that is expected to develop formal guidance across the CMA’s functions – and will be worth keeping an eye on for developments!
Please also see Linklaters’ other publications on the CMA Guidance and the CMA’s advice to the UK Government regarding sustainability.
(b) Recent cases and CMA guidance regarding trade associations
As mentioned above, there aren’t many recent cases in the UK involving trade associations and none of these seem to have a direct sustainability angle. The most recent case (1379/5/7/20, Kerilee Investments Limited v International Tin Association Limited) is a standalone competition damages claim currently before the Competition Appeals Tribunal (“CAT”) brought by Kerilee Investments, a metal trader, against the International Tin Association, a UK based trade association. The claimant alleges that the trade association abused its dominant position and engaged in anti-competitive agreements in two interrelated markets: the market for certain responsibly produced and supplied minerals and the market for accreditation and standardisation of producing and supplying such minerals.
In 2018 the CMA also published case summaries of its recent decisions involving trade associations, together with a one-pager of Dos and Don’ts for Trade Associations and a brief video on information-sharing rules for businesses. These short publications were meant to supplement the Office of Fair Trading’s (“OFT”) (one of the CMA’s predecessors) 2004 Guidance on trade associations, professions and self-regulating bodies, which was much more extensive.
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Decisions of 29 April 2011, RKR -12/2011 and of 19 December 2011, RKT-50/2011.
Decision of 23 May 2011, DOK-4/2011.
See e.g. Decision of 31 December 2012, RŁO 60/2012.
Decision of 29 December 2017, RKT-12/2017.
Decision of 22 December 2017, RKT-10/2017.
Decisions of 18 September 2006, DOK - 106/06 and of 19 July 2013, RKT-21/2013 respectively.
EUR 1 = PLN 3.8598 according to EUR exchange rate of the Polish National Bank as of 30 December 2005, which was relevant for Decision issued in 2006.
Decision of 25 June 2011, DOK-6/2011 – annulled by the Competition Court.
Decision of 19 April 2010, RWA-3/2010.
Decision of 28 December 2015, RWA-24/2015.
Decision of 28 September 2020, DOK-3/2020.
English version available at: https://www.cnmc.es/sobre-la-cnmc/documentos-posicion/consulta-ce-sostenibilidad-medioambiental