tas (trade associations) = Chambers of Commerce = associations of undertakings [aus]
are used as a platform for concerted (anticomps) action in prices, since companies can meet there to negotiate prices etc, and cannot be accused of communications between companies
undertakings often use a ta, to facilitate or cover up unlawful collusion.
<> cocos will give ‘free’ advice to SFAs [assocs with statutory functions], arguing that their infringement does not flee cl, cp, becos of SFA‘s actions/omissions have (had) a dir or indir effect on the market, thus on competition….[eg: seeking members commercial interests…eg via tacit uas.]…, thus, this assoc is a ta, thus bound by cl/cp….thus, acted uv , and was negligent/reckless by failing to comply with cl/cp.
<> cocos performs no dir or indir effect on the market, thus is not a ta…thus, cl cp does not apply to cocos
1/ as membership of the WTO has grown, reaching multilateral consensus has become increasingly problematic, as some countries resist “deep provisions” that restrict sovereignty. As a result, countries prefer to reach RTAs in areas where there is no consensus among WTO members
2/ lack of regulatory coherence across jurisdictions, means that modern RTAs address regulatory areas wrt EL, CL, AL
how is AL being embedded into TAs?
TAs’ AL provisions
A study of the Asia- Pacific Economic Cooperation (APEC) countries, for instance, found that improving TA transparency, could raise inter-APEC trade by approximately US$148 billion or 7.5% of baseline trade in the region
TAs (international) have the potential to disrupt corruption (becos corruption is a national vicious cycle)…how?: TAs reduce corruption by removing/reducing tariffs, thus diminishing the unduebenefits and the influence/capture of domestic (corrupt) companies, over national (corrupt) politics.
ANTICOR IN THE WTO REGIME
WTO’S transparency provisions are not to enhance public accountability , but is just a tool for stability by building trust between WTO member states…WTO’s Transparency Mechanism simply requires countries negotiating RTAs to notify the WTO before any deal comes into force….but fails to establish transparency as a TA good governance principle….the WTO regime has no rules addressing corruption or bribery in internatinal trade
exceptions:
-WTO Trade Facilitation Agreement (TFA), streamlines border transactions and increases customs transparency
-WTO Government Procurement Agreement (GPA): signatories must open part of their public procurement market to foreign operators. GPA now covers 47 WTO members, and $1.7 trillion in procurement….The GPA establishes external oversight of national procurement systems by making them subject to scrutiny by the WTO, and through the WTO’s binding dispute settlement system…..The GPA mentions the need for transparency and anticorruption in its preamble, but the preamble is not binding, … Moreover, while the agreement covers corruption risks in the decision to award a contract, it does not address corruption risks during the drawing up of the tender, or during implementation and operation
TAs egs:
-US: The DR-CAFTA agreement,
-EU: General, non-binding provisions encouraging the mutual opening of procurement markets are to be found in the series of Euro- Mediterranean Association Agreements …. also, the majority of Chapter 26’s obligations, are subject to TPP’s dispute settlement system, which can be resorted to where a state has acted in a manner “inconsistent with an obligation.” …thus, a country may be liable, if it failed to adopt the foreseen anti-bribery legislation, although the dispute settlement mechanism cannot be used to challenge inadequate enforcement of anti-corruption laws, or failure to prosecute or convict under its domestic anti-bribery legislation….Also, chapt.26 does not specify what “effective” enforcement entails. Moreover, TPP provisions do not require the criminalisation of private offences…..Article 15.8 of the agreement relates to integrity in public procurement, and requires parties to establish criminal or administrative measures “to address corruption in its government procurement.” Notably, it also provides scope for countries to debar fraud firms
-CETA: The EU’s Comprehensive Economic and Trade Agreement with Canada includes a general horizontal chapter on transparency
TA ANTICOR PROVISIONS
international anticor instruments, be it the UNCAC, or provisions in TAs, are just “myth systems”, aspirational texts rather than functional obligations…..only TAs that offer an economic incentive, requiring signatories to ratify anti-corruption conventions or enact de jure anti-bribery measures, can accelerate anticor…..even in developed countries, the failure to enforce foreign bribery legislation [eg the OECD Anti-Bribery Convention], or TAs anticor provisions, has led to what some experts have called “pernicious protectionism”……..Thus, the real value of TA anti-corruption provisions, lies in NATIONAL enforcement
Bilateral and regional trade deals do not benefit from the WTO Dispute Settlement System (dss=adr) for enforcement, thus, to press a state to enforce, depends on :
- a. political pressure
- b. national anticor laws/regs
- c. 2 dss: those between investors and governments (ISDS) and between sovereign states (GGDS)
- d. IMM: (proposed) independent monitoring mech.
Investor State Dispute Settlement (ISDS)
Many TAs, like NAFTA, TPP and the EU- Canada CETA offer certain protections to foreign traders and investors similar to those provided by bilateral treaties
They permit investors to seek restitution, outside of the host state’s judicial system, where that state has not complied with its treaty obligations
nations’ main Defence is alleged corruption by public officials, who engaged in bribery during the drawing up of the contract, rendering the contract void or illegal so that there is no valid contract for the ISDS to enforce….iow: investments proven to be tainted by corruption, are divested of ISDS protection, thus providing little motivation for states to stamp out corruption……BUT…in World Duty Free v. Kenya, and Metaltec v. Uzbekistan. Yackee: held: this “corruption defence” might in fact encourage public officials to engage in corruption and/or dissuade governments from passing domestic anti-corruption legislation.
Arbitration panels could rule that failure to prevent corruption among public servants is a violation of a state’s obligation to provide “fair and equitable treatment” to foreign firms. eg: case:. EDF (Servs.) Ltd. v. Romania:
held: a request for a bribe by a State agency, is a violation of the fair and equitable treatment obligation owed to the Claimant” under the investment treaty. a prohibition of bribe solicitation should be interpreted as a legally binding obligation
However, ISDS systems are highly controversial, due to the imbalance they can create between the foreign investors and the host state in matters of WPI
GGDS- Government-Government Dispute Settlement
GGDS have not yet included obligations to combat corruption,[ considerably limiting ggds enforcement]…why? because if it was made subject to dss, states could try to settle disputes concerning the implementation of anti-corruption pledges. This would have a significant impact on state sovereignty and is likely to be fiercely contested by state parties.
indep monitoring mechanism IMM
To date, no trade agreement has foreseen a IMM.
This could take the form of self-evaluation (e.g. WTO trade monitoring reports), peer review (e.g. OECD Working Group on Bribery), a combination of these two (eg. Trade Policy Review Mechanism in the WTO) or it could be facilitated through shadow-reporting by an independent organisation (e.g. TI’s “Exporting Corruption” reports; or Global Trade Alert)
undertakings often use a ta, to facilitate or cover up unlawful collusion.
Self regulation, through consumer codes of best practice, is far better and more flexible alternative to statutory regulation and enforcement.
(1) Trade associations (tas) play as forums for exchange of views on important issues of common interest for the industry sector which they represent. they promote the efficient functioning of the market. They provide services to their members, also have important ‘industrial policy’ and ‘political’ functions. Most trade associations take an active role in shaping the way their industry works. They promote product standards and best practices, standard terms and conditions of sale. codes of ethics, and in some cases they formulate and enforce industry self-regulation. They issuerecommendations to their members on a variety of commercial and non-commercial issues.
(2) Many trade association activities benefit from statutory and non-statutory exemptions or
immunities from the application of competition rules, to permit them to perform these beneficial roles. A fundamental right of individuals and corporations is the right to associate freely or to join an existing association.thus, tas and their members cannot be held liable under the antitrust statutes simply for exercising a fundamental constitutionally right. This is so even if active participation in a trade association may provide the ‘opportunity’ for unlawful agreements.
to preserve the associations’ right to petition governments, some jurisdictions have
exempted from antitrust liability concerted efforts to secure government-imposed restraints on competition. For competitors to lobby the government to change the law in a way that would reduce competition cannot be a violation of the antitrust laws, unless the concerted action is a mere “sham” should this activity be subject to antitrust scrutiny even when authorised by law?
3- Tas bring together direct competitors and provide them with regular opportunities for exchanges of views on the market, which could easily spill over into illegal coordination. Casual discussions of prices, quantities and future business strategies can lead to agreements or informal understandings in clear violation of antitrust rules. It is for this reason that trade associations and their activities are subject to close scrutiny by competition authorities around the world…The traditional areas of concern about trade associations are price fixing, allocation of customers or territories and bid-rigging. Naked price fixing or customer allocation conspiracies orchestrated by a trade association are becoming rarer, though.
(4) Associations may be liable for antitrust infringements, but…If only the turnover of the association is taken into account, then the fine is small and the deterrent effect limited.
For this reason, cma.ec have tried to lift the associational veil and to take as reference for the
fine the turnover of the members of the association.
some countries have introduced provisions under which if the fine imposed on the
association takes into account the turnover of its members and the association is not solvent, the association is obliged to call for contributions from its members to cover the fine.
ta = voluntary association* of business firms organised on a geographic or industrial basis to promote and develop commercial and industrial opportunities within its sphere of operation, to voice publicly the views of members on matters of common interest, or in some cases to exercise some measure of control over prices, output, and channels of distribution”
*association hence includes all sorts of unions, alliances, societies, fraternities and groups in all fields of human interest (such as art, literature, philanthropy, charity, etc.). However, not all these combinations of individuals and/or legal entities qualify as associations for antitrust purposes. In the absence of a legal definition of ‘association’ for antitrust purposes, the notion of ‘association’, as with the notions of ‘undertaking’ or ‘business entity’, is generally defined in actual enforcement cases by the antitrust agencies or by the courts and it is generally interpreted widely.
In order for competition law to apply to an association two elements should be present:
• The structural/organisational element:
An association must have some lasting corporate structure. The presence of a corporate structure is relevant in two respects.
1- distinguishes the association (and its antitrust liability) from that of its members.
2-the corporate structure distinguishes an association from a mere joint activity of competing companies (such as an ua). The legal form of the association is, however, irrelevant as it is irrelevant if the association has legal personality, or if it is a profit-making organisation. Similarly, the public nature of the functions performed by the associations has no bearing on the applicability of competition rules. Competition rules equally apply to associations of associations ( 2DAUs: second degree associations).
decisions of associations with statutory functions may escape the application of competition rules if they are limited to what is required in the statute and do not extend to the pursuance of commercial interests of the members.
<> cocos will give ‘free’ advice to SFAs [assocs with statutory functions], arguing that their infringement does not flee cl, cp, becos of SFA‘s actions/omissions have (had) a dir or indir effect on the market, thus on competition….[eg: seeking members commercial interests…eg via tacit uas.]…, thus, this assoc is a ta, thus bound by cl/cp….thus, acted uv , and was negligent/reckless by failing to comply with cl/cp.
The functional element:
An association must have the ability to affect an economic activity. It is
not required that the association itself is active on a market, but its activities must somehow have an effect on competition. Many associations perform functions that have no direct or indirect effect on the market, such as charities or cultural organisations. In this case, the association and its activities fall outside the scope of application of the competition rules.
<> cocos performs no dir or indir effect on the market, thus is not a ta…thus, cl cp does not apply to cocos
Associations should also be distinguished from other combinations of businesses, such as mergers and joint ventures.
a ta is normally not an active player on a market but provides services only to its members. Unlike trade associations, mergers and joint venturesbhave an effect on the structure of the market….Unlike tas, the main activity of a typical joint venture is research, production and distribution on its own right. The joint venture’s market role may be separate from that of
its parents and is more like that of an ordinary firm…Generally, there are three main categories of associations which have an antitrust relevance:
- -tradeassociations;
- -professional associations
- -other self-regulating organisations
- Trade associations are the most common form of associations. According to the American Bar
tas=tus are sometimes cl bound…egs :
eg. their employees [=members], are economic entities.
eg. ta is not acting as a mere agent of its members but it is acting on its own merit and the activities under scrutiny have an economic nature….Case C-67/96, Albany International BV v. Stichting
eg. in usa: collectively bargaining between (members/tas), are cl exempt, unless improper.
3 ta functions [to seek the commercial interests of their members and of
society as a whole = EWPIUA]….are:
1- Activities and services for members. eg seminars, training etc; the publication of newsletters and trade journals; and the like; collect, aggregate and disseminate statistical information and industry data, and prepare regular industry reports on developments in the market.
2- Economic and regulatory functions. Tas have an ‘industrial policy’ function, as they take an active role in shaping the way their industry works. In particular, they promote product standards and best practices for their industry; they define and promote standard terms and conditions of sale; they publish and enforce codes of ethics and in some cases they formulate and enforce industry self-regulation; they issue recommendations to their members on a variety of commercial and non-commercial issues.
3- Political and lobbying functions. Trade associations also have a ‘political’ function which consists in promoting, representing and protecting the interests of members on legislation, regulations, taxation and policy matters likely to affect them.
2 types of [lobbying = tas = tus]:
a. those that are only a forum for the exchange of ideas within the
industry: these tas interact with government entities occasionally in order to promote or to oppose a given piece of legislation or regulation
b. those with wpi power to selfregulate the industry: these tas enjoy a quasi-governmental role…Professionals (e.g. lawyers, doctors, architects, auditors, accountants, etc.) eg. the Japanese trade associations: the shinboku or the “promotion of friendship”. are social events for the members’ employees and executives to discuss issues of common
interest. Unfortunately, businessmen rarely meet for merriment alone.
the ecj’s state action doctrine, outlaws state measures which
hamper the effectiveness of the EC competition rules applicable to undertakings, rather than the sad: state action defence
the ECJ concluded that: “while it is true that Article [82] is directed at
undertakings, nonetheless the Treaty imposes a duty on Member States not to adopt or
maintain in force any measure which could deprive that provision of its effectiveness”
….that is, a wide obligation on member states to abstain from depriving Article 82 of its effectiveness. Likewise, “Member States may not enact measures enabling private undertakings to escape from the constraints imposed by Articles [81] to [89] of the Treaty”
In Eycke52, the ECJ re-stated the principle established in GB-Inno-BM that the EC Treaty
requires the Member States not to introduce or maintain in force measures, even of a legislative nature, which may render ineffective the competition rules and clarified that “such would be the case, […], if a Member State were to require or favour the adoption of agreements, decisions or concerted practices contrary to Article [81] or to reinforce their effects, or to deprive its own legislation of its official character by delegating to private traders responsibility for taking decisions affecting the economic sphere”
As for the state action defence [SAD],ecj held that the Member states’ obligations under the Treaty are distinct from the antitrust liability of the private entities under the ECcl….ecj: the sad does not exempt private entities from antitrust liability. Under EC law, companies are
not responsible if their anticomps are required by a public measure and companies had no
space for ‘autonomous conduct’. The ECJ held that such defence is based on “the general Community-lawprinciple of legal certainty”
However, the undertakings are responsible under the ECcl and may incur fines if the public measure “merely encourages, or makes it easier for undertakings to engage in autonomous anti-competitive conduct”. In such cases, antitrust liability can be established but the national legal framework may be taken into account as a ‘mitigating factor’ to reduce the fine imposed
Competition rules, self-regulation and professional associations:
professions, which often pursue general public interests such as consumer
safety, health care or justice, have often been brought forward in antitrust cases as a basis for a more lenient cl approach…why?:
(1) the asymmetry of information between professionals and their clients
(2) considerations related to the quality of care, health and public service in connection with the delivery of professional services, which may have an impact not only on the direct purchaser of the service but also on third parties
(3) the public service aspect of professions which, in some cases, are considered to offer
public goods that are valuable for the society as a whole
thus, the legality of the restraints imposed by professional associations on their members should be governed by a different antitrust standard than that applicable to non-professionals.
the ECJ found that professional associations are subject to the competition rules of the EC
Treaty but….that in some circumstances restrictions adopted by professional
associations may escape ECcl, if they are necessary to insure the proper functioning of the profession, as organised in each Member State.
Wouters judgment:
one has to look at the objectives of the measure under scrutiny in order to ensure that
the ultimate consumers of the professional services are provided with the necessary guarantees. The consequential restrictive effects must be inherent to the pursuit of those
objectives and must not go beyond what is necessary in order to ensure the proper practice of the profession (the so-called proportionality test).
self-regulation by professional associations is not always pro-competitive….a selfregulation is unlawful if it is likely to raise price and restrict output in a manner that would be harmful to consumer welfare.
The very objectives of the association as agreed by the members in the act of incorporation could have an anticompetitive object.
Many associations represent companies which are active in more than one segment of the same industry sector, such as manufacturers, wholesalers, distributors and retailers. In such cases, the activities of the trade associations can potentially result in unlawful vertical restraints.
Trade associations which represent a large share of the industry participants could be found to hold market power and therefore be subject to antitrust provisions on unilateral conduct. This could be, for example, the case if the trade association were to refuse, without justification, to extend the benefits of membership to a competitor within the industry.
While horizontal price restraints are in most jurisdictions reviewed under a per se standard of illegality, nonprice restrictions are reviewed under a rule of reason standard
UNITED KINGDOM
in the United Kingdom, tas are found in almost every sector of the UK economy (and
indeed many UK companies and national bodies are members of international trade associations)….tas jobs:
• representing to Government, the European Commission and other public bodies the interests of members on legislation, regulations, taxation and policy matters likely to affect them;
• promoting and protecting the interests of members in the media;
• collecting and disseminating aggregated and historic statistics and industry information,
• collecting and disseminating information about legislation and Government policy;
• promulgating voluntary standards, codes of practice or standard terms and conditions of sale;
• providing a range of services of an advisory or consultancy nature on, for example, legal,
accounting, training or environmental matters; and
• providing advice of a more commercial nature.
The cma’s experience of trade associations thus goes beyond the confines of cartel
enforcement under Article 81 of the EC Treaty or equivalent national competition legislation….also, i will not discuss here practices involving trade associations that might be examined under Article 82 (e.g. the use of membership rules to exclude competitors from joining the association and sharing in the benefits of membership).
the cma, as a combined competition and consumer authority, operates a Consumer Codes Approval Scheme (CCAS), whereby groups of businesses (usually through a trade association) draw up voluntary codes of practice which set challenging standards of customer service above those required by law
Competition Act 1998:
the prohibition in section 2 of the Competition Act 1998 (the Chapter I prohibition) mirrors that contained in Article 81 except as regards jurisdiction (UK rather than EU-wide).
The cma may therefore investigate cartels where, for example, the anti-competitive conduct arises through decisions made by a trade or business association (where the association constitutes an undertaking) or through agreements between members of the association.
Enterprise Act 2002:
The cma conducts market studies under section 5 of the Enterprise Act 2002 (EA02)
Following a study the OFT may decide to, e.g., give the market a clean bill of health, publish information to help consumers, encourage firms to take voluntary action, encourage a consumer code of practice, made recommendations to Government, investigate/carry out enforcement action against companies or individuals suspected of breaching consumer or competition law, or make a market investigation reference .
The OFT also operates a Consumer Code Approval Scheme under section 8 EA02 whereby:
“…the OFT may … make arrangements for approving consumer codes and may, in accordance
with the arrangements, give its approval to or withdraw its approval from any consumer code.”
Section 5 states that the OFT has the general “function of obtaining, compiling and keeping under review information about matters relating to the carrying out its functions.”
UK enforcement experience under the Competition Act 1998
eg. In GISC6 one of the rules of the General Insurance Standards
Council prevented its members from dealing with insurance intermediaries unless they were themselves members of GISC. After the cat concluded that this rule was anticomp
GISC dropped the rule.
eg. cma concluded that the NILAA had infringed the Chapter I prohibition by recommending that its members introduce a standard buyer’s commission to be payable by purchasers
Professions:
The OFT has also used its CA98 enforcement powers to address restrictions created by professional bodies (which are forms of trade associations). In 2000 the OFT reviewed the British Medical Association’s general fee guidance to medical practitioners….The BMA has since introduced new arrangements which assist locums to calculate and negotiate their fees independently.
Some UK local law societies conduct surveys of the current hourly litigation rates that their members charge: this information is sent to the courts who may use it when awarding costs. In 2005 the OFT received a complaint that the Surrey Law Society (SLS) had on one occasion circulated among its members an anonymised version of the results of such a survey. After the OFT made known its concerns about the sharing of such information, SLS decided to cease circulating it among its members.
under the merger provisions of the Enterprise Act 2002, the OFT often receives
responses from trade associations in response to its Invitations to Comment as to the association’s views on a particular merger. The OFT may also contact them as part of its third party enquiries in mergers, for example for their opinions on such matters as the degree of substitutability between products or whether they believe that the merged undertaking might behave anti-competitively. The OFT treats such third party responses as confidential, although the bodies themselves may choose to publicise it.
Trade associations may also respond to other consultations conducted by the OFT, providing their views on potential legislative changes or policy issues and guidance.
the majority of restrictions of competition originate in professional rules: the professional associations responsible for the restrictions (referred to as self-regulatory organisations or SROs) were given 12 months to remove or justify the rules that appeared to infringe competition law. The OFT emphasised that if appropriate action was not taken it would use its competition enforcement powers.
The Consumer Codes Approval Scheme: ccas:
The OFT has the power to encourage trade and professional associations to prepare and disseminate to their members, codes of practice for guidance in safeguarding and promoting the interests of consumers.
Since 2001, the OFT has run a Consumer Codes Approval Scheme (CCAS), the aim of which is to
promote and protect consumers’ interests by encouraging businesses to draw up and abide by voluntary codes of practice which set challenging standards of customer service.23 The CCAS aims to safeguard consumers’ interests by helping them identify businesses and brands with higher standards of customer care and in which consumers can have confidence: codes approved through this process carry an OFT Approved code logo. By signing up to an OFT approved code, a business has agreed to provide consumers with the benefits that are outlined in the code. These include clear pre-sale information, fair contracts and
access to an independent redress mechanism.
Code approval process:
To submit a code for approval under the CCAS, the sector or industry must have a ‘code sponsor’. In practice a sponsor is usually a trade association, representing a majority of firms within a sector. The OFT scheme only covers business-to-consumer codes, and therefore codes that cover business-to-business transactions fall outside it.
The OFT’s experience operating the CCAS is one of dialogue with association sponsors before,
during and after a code has been approved. OFT can discuss code applications with prospective sponsors prior to the application being submitted, after application it will work with the sponsor to help them bring
The OFT defines a sponsor as being ‘a body that administers voluntary business-to-consumer codes and one that can influence and raise standards within that sector.’ The six code sponsors are:
the Society of Motor Manufacturers and Traders (which represents large car manufacturers);
the Vehicle Builders and Repairers Association Limited (which represents over 1,500 car body repairers of which over 700 provide business to consumer services);
the Direct Selling Association (whose members range from small companies to large multi-nationals);
the Ombudsman for Estate Agents Company Ltd (which represents estate agents in the UK and its code of practice for residential sales);
the Carpet Foundation (which represents over 1,000 registered carpet specialists); and Robert Bosch Ltd (who represents independent garages in the car repair and servicing sector).
The code administered by the Association of British Travel Agents (ABTA) was OFT approved until 1 September 2006 when, on introduction of a new code, ABTA withdrew from the CCAS (the new code includes changes to ABTA’s financial protection arrangements under which consumers’ deposits and prepayments are no longer protected to the same extent as under the former OFT approved code).