Satu Pitkänen Competition

Helia EC Law

Bayer and Gist-Brocades (GB) made a specialization agreement whereby the former made 6-APA, an intermediate penicillin product, and GB made raw penicillin. Prior to the agreement both firms had made both products. There were minor companies manufacturing these products but Bayer and GB were the biggest.

The specialization agreement was supported by reciprocal supply contracts, under which each firm agreed to supply the requirements of the other: Bayer would supply 6-APA to GB, and GB would supply raw penicillin to Bayer.

Evaluate the situation.

Nordic Wood is a marketing association of Finnish and Swedish paper companies. Its target is to promote the trade of its members.

A meeting of the association approved a program to arrange a marketing campaign to foreign customers and to collect and register information of the concluded deals (size of deliveries, customers, prices etc.). The aim of the campaign was to make the members of the association better know in the European market.

The association also formulated standard contract terms to provide on delivery terms, notifications, quality standards, exemption clauses, choice of law and forum clauses. Also the price level and the mutual pricing principles were discussed on. The members agreed on aiming at decreasing mutual competition and improving cooperation. These discussions were not recorded.

Some time after the meeting a member of Nordic Wood increased its prices by 20%. In a few months all the member companies had increased their prices to the same level.

Evaluate the activities.

Case Bayer and GB

The Commission:

· Individual undertakings

· have made an agreement which

· affects several EU Member States

· distorts competition because the companies are competitors

· and has effect in the EU

ð The agreement is an infringement against Art 81

But

Since the agreement

· contributes to the improvement of production

· promotes technical progress by enabling rational use of resources

and

· does not eliminate competition entirely

greater number of end-products will be in the market, therefore prices will decrease, and consumers receive a fair share of the benefits, the agreement is exceptionally acceptable.

Nordic Wood

· Mutual marketing campaigns are generally accepted

· Collecting and registering information on the concluded deals, prices etc.

increases parallel marketing behaviour and unique contract terms

ð may be against art 81 (conscious parallelism)

· Standard contract terms are accepted as long as they don’t distort competition

· Agreements on price level and pricing principles and

· Agreements on decreasing mutual competition are against art 81

· Increasing prices to the same level within a short time is against art 81 unless there is an objective reason (oligopoly?)

· Coordinated practices are forbidden if they can be proven as conscious parallelism

ð The Commission may investigate the case and if necessary, prohibit the activities under penalty of fine