Trade associations under scrutiny by competition authorities

The Norwegian Competition Authority recently fined a trade association of household appliance repairers for issuing price recommendations to its members. Likewise, during the last year, competition authorities in Denmark and Sweden have clamped down on similar practices in trade associations.

iStock_000000414163Large

Trade associations – an antitrust high risk zone

In Norway, as in most jurisdictions, a provision corresponding to Article 101 TFEU prohibits coordination of market behaviour between competing firms. As members of a trade association are usually competitors, trade associations may be used as a vehicle for unlawful cooperation between competitors. Such cooperation may include different forms of price fixing, exchange of sensitive business information, bid rigging or other ways of coordinating member firms’ relations with customers or suppliers.

Increased focus on trade associations

A significant number of cases have been brought against trade associations lately, not only in Norway, but also in the other Nordic countries.

In 2014, Danish competition authorities acted against a trade association of car repairers for recommending a collective boycott of a web page offering price comparisons for repair services. This was seen as an attempt to coordinate market behaviour of member firms, and considered a restriction by object. The decision was upheld on appeal. Furthermore, Danish competition authorities have recently investigated a doctors’ association for recommending that its members reduce the number of consultations.

In Sweden, competition authorities are currently investigating the Swedish bankers’ association, for issuing recommendations on amortization plans to its members. In addition, the EU General Court recently confirmed a Commission decision fining the French Ordre national des pharmaciens for several recommendations pertaining to group structure, as well as price fixing.

The high number of investigations involving trade associations in the last year suggests that competition authorities are keeping a keen eye on their activities. Thus, trade associations need to be able to distinguish activities they may lawfully engage in from activities that may amount to unlawful coordination of their members’ market behaviour.

Where to draw the line

Clearly, trade associations have an important, and perfectly legitimate, role to play in seeking political influence, issuing professional recommendations to their members or engaging in general information activities. At least as a general rule, it is legitimate for trade associations to engage in educational activities, general lobbying, to provide legal advice or to draw up standard agreements (without price coordination).

By contrast, trade associations must take care not to engage in activities involving price coordination, output limitations, sharing of markets by geographic area or customer groups, et cetera.

A number of tricky grey zones persist, such as industry statistics and other types of information gathering and dissemination, price calculation support, et cetera.

Furthermore, even when carrying out legitimate activities, trade associations need to carefully consider competition law. When lobbying against a legislative proposal, a trade association may argue that the proposal will undermine the viability of its members, but members may not share information about their margins and profitability in order to reach such a common position.

By definition, trade associations are working for the common interests of competing firms. As such, they navigate difficult waters where the line between lawful and unlawful conduct is often a fine one. Thus, antitrust awareness within the association is essential. A useful step in the right direction would be to put in place clear, industry specific compliance programmes, and to ensure their effective implementation within the association as well as with members. Waiting for competition authorities to take action is a risky option: Competition investigations are time-consuming and costly processes, and fines can be very high.