Art 101 TFEU and Horizontal Cooperation in EU

ARTICLE
101 TFEU &

HORIZONTAL COOPERATION
‘’An assessment of infringement, compliance and exemption of horizontal cooperation
agreements within the Compose project: Is cooperation and information exchange
between undertakings allowed under article 101(1) TFEU and if not are the economic
efficiencies sufficient for exemption under 101(3) TFEU?’’

J. (Jimmie) de Kruijf
ANR: 164932
Defense date: 15/6/2017
Master International Business Law
Supervisor: S.A.C.M. Lavrijssen
Second reader: A. Marhold

Table of Contents
Chapter 1: Introduction ...................................................................................................... 3
Chapter 2: The Economic Background of Competition Law ................................................. 7
2.1: Introduction to the economics of Competition Law ............................................................... 7
2.2: Horizontal Cooperation ......................................................................................................... 8
2.2.1 Horizontal cooperation agreements ....................................................................................... 8
2.2.2 Horizontal cooperation within logistics .................................................................................. 9
2.3 Determination of the relevant market .................................................................................. 10
2.4 Final thoughts on the economics of competition law ............................................................ 11
Chapter 3: Legal Framework of Article 101(1) TFEU .......................................................... 12
3.1 An introduction to the legal framework of article 101(1) TFEU ............................................. 12
3.2 Council regulation 1/2003 .................................................................................................... 13
3.3 Guidelines on the application of article 101 TFEU to horizontal cooperation agreements ..... 13
3.4 De Minimis Notice ................................................................................................................ 15
3.5 Test of article 101(1) TFEU .................................................................................................... 16
3.6 European Night Services, Metropole Television v. Commission & Wouters .......................... 19
3.7 Information exchange under 101(1) TFEU ............................................................................. 21
3.7.1 Information exchange: introduction ..................................................................................... 21
3.7.2 Information exchange: assessment under article 101(1) TFEU ............................................ 22
3.7.3 Information Exchange: points of attention ........................................................................... 24
3.8 Conclusion on article 101(1) TFEU ........................................................................................ 26
Chapter 4: Legal framework of article 101(3) TFEU ........................................................... 27
4.1 An introduction to the legal framework of article 101(3) TFEU ............................................. 27
4.2 Guidelines on the application of article 101(3) TFEU ............................................................. 27
4.2.1 Different views on article 101(3) TFEU ................................................................................. 28
4.2.2 First condition of article 101(3) TFEU: Efficiency gains ......................................................... 28
4.2.3 Second condition of article 101(3) TFEU: Fair share for consumers ..................................... 29
4.2.4 Third condition of article 101(3): indispensability of the restrictions ................................... 30
4.2.5 Fourth condition of article 101(3) TFEU: No elimination of competition ............................. 30
4.3 Block exemptions under article 101(3) TFEU ......................................................................... 31
4.4 Conclusion on article 101(3) TFEU ........................................................................................ 31
Chapter 5: Compose ......................................................................................................... 33
5.1 The Compose Project ........................................................................................................... 33
5.2 Article 101(1) TFEU and Compose ......................................................................................... 34
5.3 Article 101(3) TFEU and Compose ......................................................................................... 36
Chapter 6: conclusion & recommendations ...................................................................... 40
6.1 Legal recommendations for the Compose project ................................................................ 41
6.2 Research recommendations for the Compose project .......................................................... 42
List of literature ................................................................................................................ 43
Books ......................................................................................................................................... 43
Articles ...................................................................................................................................... 43
Policy documents, guidelines and notices .................................................................................. 43
Cases ......................................................................................................................................... 44

2
Chapter 1: Introduction

Horizontal cooperation involves companies operating at the same level of the market to work together,
hereby generating efficiencies through cooperation that would be more difficult to achieve alone.
Cooperating horizontally can be beneficial for companies involved, for consumers and for the economy and
the markets. This is widely recognised in economic literature and is reflected in legislation and European
policy documents as well. However, there are legal barriers and risks that must be addressed when
cooperating on a horizontal level. One of the most important legal barriers is competition law, which
prevents agreements or concerted practices from restricting or distorting competition. This thesis is drafted
in the context of an internship for the Compose project. The Compose project is a project from evofenedex,
an organization for the interests of small, medium and large companies with a focus on logistics and
international business. The project involves composing horizontal cooperation agreements between
companies based on which companies have the best ‘’fit’’ to work together. Companies will be matched
using a ‘’matching tool’’ that aims to achieve a physical and cultural fit. The main goal of the project is to
match companies and support them to work together horizontally. This horizontal cooperation can take
many forms, for example, HR, finance, strategy, information exchange and logistic cooperation. In this
thesis, I often use logistic cooperation as an example since this is the area of expertise of evofendex and a
form of horizontal cooperation that has a lot of potential and demand from the industry. However, the
Compose project is not limited to logistic cooperation and aims to match companies and organize horizontal
cooperation according to their needs. Together with my fellow student, Lieke van Daele, we cover the
competition law aspects of this project. I provide advice on article 101(1) TFEU, the main provision
prohibiting agreements that restrict competition, and on article 101(3) TFEU, the exemption that allows
certain restrictive agreements if they generate sufficient efficiencies. Lieke van Daele will cover article
101(3) TFEU with a different focus, I focus on economic efficiencies and her focus will be public policy
objectives and other efficiencies than economic efficiencies that might be considered under article 101(3)
TFEU. Students from various backgrounds work on the Compose project, social psychology students are
involved to provide advice on the matching of companies and supply chain students are involved to provide
advice on logistic cooperation and supply chain optimization, which might be a form of cooperation under
the Compose project.

My focus is article 101(1) TFEU and article 101(3) TFEU. Article 101 TFEU is one of the two main provisions
in European competition law, and prohibits agreements or concerted practices that may prevent, restrict
or distort competition. This thesis creates an overview of the legal framework and its application under
article 101 TFEU and provides recommendations to reduce the risk of infringing competition law when
organizing horizontal cooperation agreements under the Compose project. European competition law is
enforced by the European commission and the national competition authorities. They research possible
3
anticompetitive practices and make their cases in both European and national courts respectively. The
competition authority in the Netherlands is the authority for consumers and markets (ACM). The system of
European competition law is characterised by self-assessment, which implies that the responsibility of
compliance with competition law regulations is a responsibility of companies themselves. The European
Commission provides guidance to companies by publishing guidelines on article 101(1) and 101(3) TFEU
and by publishing notices on relevant competition law topics like the definition of markets. This system of
guidance and self-assessment can be complex, which results in uncertainty about horizontal cooperation
agreements. In this thesis, I describe these guidelines and provide clear recommendations to develop the
Compose project, while competition law is an important concern in horizontal cooperation, it should not
stand in the way of achieving a breakthrough in horizontal cooperation. While the Commission enforces
competition law and makes cases against companies that might violate article 101 TFEU, it is up to the
courts to decide whether there is a violation of article 101(1) TFEU or not.

The assessment of agreements under article 101 TFEU consists of a two-part test.1 The first step is to assess
whether the agreement has as its object or effect the possibility of preventing, restricting or distorting
competition under article 101(1) TFEU. If there is a restriction of competition this may be allowed under
article 101(3). The efficiencies of the agreement may outweigh the restrictive effect on competition. To
qualify for the exemption, the agreement must promote technical or economic progress, consumers must
receive a fair share of benefits from the agreement, restrictions on competition must be indispensable and
competition must not be eliminated in a significant part of the market. Currently there is much debate
about the scope of the article 101(3) exemption and which efficiencies apply, traditionally there is a focus
on economic efficiencies and this is made clear in the reasoning and argumentation of the Commission both
in their guidelines and in their cases. However, there is currently debate over a broader view of article
101(3) TFEU, which involves other benefits than economic benefits as well. While the Commission still
adopts a narrow view, the courts and national competition authorities are allowing more room for public
policy objectives. My fellow student, Lieke van Daele, will cover these efficiencies in her thesis.

Horizontal cooperation agreements can infringe competition law in several ways. When companies work
together this could result in anticompetitive practices like price fixing, sharing of markets and output,
strategic information exchange and many more. Often this is not the intention of companies but it is a risk
nonetheless. Companies that work together tend to share information, this can be dangerous because
information exchange can lead to reduced uncertainty between parties, which can lead to collusion. This is
especially the case when information includes prices, quantities or other strategic information that could
lead to a reduction of strategic uncertainty. Because competition law is applied on case-by-case basis it is
impossible to provide guarantees. Therefore, I advise to examine every individual cooperation agreement

1
101(1) Guidelines to horizontal cooperation agreements, paragraph 20
4
between companies, using the Commission’s guidelines and my recommendations, and if companies with
large economic interests or market shares are involved, seek the advice of legal counsel with expertise in
competition law. These competition law concerns have led me to formulate the following research
question:

An assessment of infringement, compliance and exemption of horizontal cooperation agreements within
the Compose project: Is cooperation and information exchange between undertakings allowed under
101(1) TFEU and if not are the economic efficiencies sufficient for the exemption under 101(3) TFEU?

This question is wide in scope and allows for the creation of a legal framework as well as for the application
to the Compose project. Important to note is that information about the Compose project is still limited,
since the project is still in its early stages. Therefore, I provide recommendations to keep in mind when
developing a matchmaking and network tool and when setting up horizontal cooperation agreements
between companies.

This thesis is composed using different research methods. Primarily legal-dogmatic research to draft a legal
framework that is applicable to horizontal cooperation agreements and information exchange. The legal
framework includes an overview of the most important legal provisions, relevant case-law and other soft-
law such as notices and guidelines by the Commission. While creating this framework, I also consulted
relevant legal and economic doctrine in the form of academic articles. Currently, there is a gap in literature
in the field of European competition law and its application to the field of horizontal cooperation
agreements in the logistics sector. Horizontal cooperation between companies is currently an important
topic and subject of debate in supply chain literature. Therefore, I hope to provide a valuable addition to
the academic debate. Besides legal-dogmatic research I also used an empirical approach. The Compose
project requires an application of the legal framework on the possibilities of organizing cooperation
agreements between companies and by providing recommendations that can be used during the
development of the matchmaking and network tool. Lastly this thesis has a multidisciplinary approach.
Competition law is closely connected with economics. Therefore, economic theory will automatically play
a role in the application of competition law. Especially important here are the definition and characteristics
of markets, market share and market dominance. An economic approach is also necessary to determine
the efficiencies gained from horizontal cooperation agreements. One of the goals of the Compose project
is the optimization of supply chain. Therefore, it is necessary to consult literature from the field of supply
chain management to place the agreements in their proper context. One of the biggest challenges with a
multidisciplinary approach is to assess the legal importance of the information2.

2
Vranken, 2014, p.43
5
In the last part of this introduction I briefly set out the structure of the thesis. In the upcoming chapters I
cover the economic background of competition law and horizontal cooperation agreements, the legal
economic doctrine of article 101(1) and of 101(3) TFEU. These chapters are the foundation of the legal
framework, including an assessment of important legal provisions, guidelines from the Commission, case
law and literature review. The final two chapters cover the application of the legal framework to the
Compose project and my conclusion and recommendations.

6
Chapter 2: The Economic Background of Competition Law

2.1: Introduction to the economics of Competition Law

In the second chapter of my thesis I provide some economic background to the system of competition law,
to horizontal cooperation in general and to horizontal cooperation agreements within logistics. In this
chapter I cover the process of market definition as well, since this could be relevant for the assessment
under article 101(1) TFEU and this is more an economic concept then a legal one. In this introduction, I
briefly discuss the economic background of competition itself and the surrounding system of competition
law. Before discussing the legal framework and rules in subsequent chapters, it is important to provide
some contextual information, this way the practices of the courts and the Commission can be better
understood.

European competition law has three goals, these goals were confirmed in the T-Mobile v. Nederlandse
Mededingingsautoriteit case: protecting the structure of the market, protecting competition as such and
enhancing consumer welfare.3 The opinion of the advocate general in this case explains the design of article
101(1) TFEU in more detail: the article is not designed to protect individual interests of competitors and
consumers, but to protect the structure of the market and competition as such. This protects consumers
indirectly.4 The Commission sees the protection of consumer welfare as the primary goal of EU competition
law.5 In the past years there has been debate about the shift of the Commission to a more economics based
approach. Whether this is truly the case is subject to debate, many previous decisions from the Commission
contained an economic reasoning, although rather implicit then explicit.6 A consequence from this more
explicit economic reasoning by the Commission has been to move the focus of the competitive assessment
away from protecting competitors towards protecting competition.7 This shifts the focus of the assessment
from assessing the form of the conduct towards an analysis of effects under the conduct. This shift is clearly
visible in the guidelines the Commission published both on article 101(1), 101(3) TFEU and the Notice on
market definition. In these documents the Commission describes their practices of analysis and assessment
and the economic approach that is taken by the Commission.

I want to discuss two economic models: the model of perfect competition and the monopoly. These models
do not provide an accurate description for the competitive process in most industries, but they can be used
to judge if intervention by competition law is likely to improve consumer welfare.8 These two ‘’extreme
scenarios’’ are often used in the Commission’s guidelines and reasoning. The degree of competition and

3
CJEU 4 June 2009, C-8/08 (T-Mobile / Nederlandse Mededingingsautoriteit) par 38
4
Opinion of Advocate General Kokott 19 February 2009, C-8/08 (T-Mobile / Nederlandse Mededingingsautoriteit) par 58
5
Gerbrandy, 2010, p. 1206
6
Bishop & Walker, 2010,p. 5
7
8
7
monopoly has a substantial influence in the assessment of restriction of competition. In the model of
perfect competition, the quantity of traded products is so small relative to the total quantity that trading
leaves prices unchanged, the product is homogeneous, all firms are identical and there are no information
asymmetries. Entry and exit barriers do not exist. Markets with perfect competition have the following
consequences: the price is equal to the marginal cost, the price is equal to the average cost (marginal cost
is equal to average cost) and no firm makes positive economic profits.9 Firms make no positive profits,
because if the price was high enough for firms to make profits, other firms that were not in the market
would enter to share these profits. The assumption of free entry means that this would continue until firms
were no longer making profits. The assumption of free exit means that firms would leave the market if they
were no longer making profits. Hence in perfect competition firms make zero profits.10 Perfect competition
delivers both productive and allocative efficiency. Productive efficiency occurs when firms are producing
products at the lowest possible costs. Allocative efficiency relates to the difference between the costs of
producing the product and the price that consumers are willing to pay for the product. If these prices are
different, then there is allocative inefficiency. Only if the price equals the marginal costs there is allocative
efficiency.11 And in perfect competition, this is the case. The other extreme is the economic model of the
monopoly. In the case of a monopoly there is just one seller, the monopolist. The monopolist will price
above the price level that would occur in perfect competition and expand output to the point where
marginal revenue is equal to marginal cost.12A monopolist increases price and reduces output compared to
perfect competition, which results in a deadweight social loss, the cost for society when a market does not
operate efficiently.13 As described above, situations of perfect competition and monopoly in its pure form
are rarely present in industries, but they provide an insight in the analysis of restrictions of competition.
For example, if producers in the floral industry would horizontally cooperate under the Compose project in
a market that is dominated by a few major players (oligopoly) then horizontal cooperation could have a
bigger influence on the market and on its entry barriers then horizontal cooperation in a market that is
closer to perfect competition or that is characterised by many players.

2.2: Horizontal Cooperation

2.2.1 Horizontal cooperation agreements

The Compose project is structured around setting up horizontal cooperation agreements between
companies. The European Union defines horizontal cooperation as concerted practices between companies
operating at the same level within the market.14 Horizontal cooperation can be defined as identifying and

9
10
Bishop & Walker, 2010,p.23
11
12
13
14
Cruijssen, Cools & Dullaert 2007, p. 5
8
exploiting win-win situations among companies that are active on the same level in the market.15 Horizontal
cooperation agreements can cause concerns in competition law. Therefore, it might have anti-competitive
effects and infringe article 101(1) TFEU. However, horizontal cooperation agreements create economic
efficiencies as well, and these efficiencies can create grounds for a successful claim on the exemption of
article 101(3) TFEU. The Guidelines on the applicability of Article 101 TFEU to horizontal cooperation
agreements acknowledges these benefits. The guidelines describe that economic benefits can be achieved
when complementary activities, skills or assets are combined and that horizontal cooperation agreements
can share risks, save costs, increase investments, pool know-how, enhance product quality and variety and
accelerate innovation.16 The guidelines also list competition problems that may arise when companies work
together on a horizontal level. These include fixing prices, agreeing on output, sharing markets or if parties
work together to obtain market power that has negative market effects.17 These legal impediments will be
discussed in more detail in the upcoming chapters on article 101(1) TFEU and article 101(3) TFEU. Before
going into the risks in those chapters I want to describe what the benefits of horizontal cooperation
agreements could include and how these are translated into logistic cooperation.

2.2.2 Horizontal cooperation within logistics

The aim of the Compose project is to connect companies horizontally and open possibilities for different
kinds of horizontal collaboration. Within the logistics sector there is a gap in literature about the benefits
of horizontal cooperation agreements and the subject has not yet been researched to full extent. However,
horizontal cooperation within logistics could be highly beneficial. Cooperation between companies within
logistics could be one of the results of the Compose project. Examples of horizontal collaboration within
logistics include combining transportation flows to make better use of LSPs, share warehouses and storage
facilities and planning joint routes. Horizontal cooperation could also reduce the costs of other expenses
like organizing safety trainings. Lastly, depending on the level of cooperation, horizontal cooperation could
reduce purchasing costs, e.g. vehicles and fuel. 18 In terms of service horizontal cooperation within logistics
could also produce benefits. Service benefits are important because they qualify towards a possible
exemption under article 101(3) TFEU. Service benefits from logistic cooperation could include better and
more precise transportation flows, resulting in more accurate delivery for clients and customers. Besides
these specific forms of horizontal cooperation in the logistic sector, the Compose project aims to organize
horizontal cooperation in a broad sense. Other areas of cooperation could include HR, finance and strategy.

15
Cruijssen, Dullaert & Fleuren 2007, p.131
16
17
18
Cruijssen, Dullaert & Fleuren 2007, p.131
9
2.3 Determination of the relevant market

Another economic concept that needs clarification concerns market definition. Within competition law we
speak of different markets. The tests if an agreement infringes competition law within the scope of article
101(1) TFEU could require a definition of the relevant market. The concept of market definition is an
economic concept and in many cases lawyers will require the services of economists to define the relevant
markets.19 The Commission published a notice to assist undertakings in doing so. The purpose of market
definition is discussed in paragraph 2 of the notice and states that defining a product or geographical market
is to identify those actual competitors of the undertakings involved that are capable of constraining those
undertakings’ behaviour and of preventing them from behaving independently of effective competitive
pressure.20 This paragraph illustrates that market definition is seen as a tool in order to assess whether or
not a firm has market power.21 Important to note is that the Commission’s interpretation of market
definition may differ by the European courts.22 Although the notice has received the approval of the EU
Courts23, the courts are not bound by the notice. The notice makes a distinction between geographical and
product markets. A product market includes all products or services which are regarded as interchangeable
or substitutable by consumers. Geographic markets concern the geographical area in which undertakings
are involved with the supply and demand of products and services in which the same conditions of
competition apply and which can be distinguished from neighbouring areas.24 The notice sets out the basic
principles of market definition which include three forms of competitive constraints: demand substitution,
supply substitution and potential competition. For market definition, demand substitution is the most
important constraint.25 For the assessment of demand substitutability the notice suggests a SSNIP (small
but significant non-transitory increase in price) test. In the SSNIP test increases the prices slightly and then
evaluates the reaction to this small increase in price. The question to be answered then is would enough
customers switch to make the price unprofitable? If the answer is yes, then it means that the market
includes both products. The same test can be used to define the geographical market as well. In most cases
the demand substitutability will determine the interchangeability within the market, however in some cases
it is useful to look at supply-side substitutability as well. Paragraph 20 of the notice states that supply-side
substitutability may be considered when defining markets. Supply-side substitution means that suppliers
can switch production to the relevant products and market them in a short time, without significant
additional costs in risks in response to a small and permanent change in relevant prices.26The third
competitive constraint is potential competition. The notice states that potential competition is not taken

19
Whish & Bailey, 2015, p.27
20
Commission Notice on market definition, 1997, paragraph 2
21
22
23
24
25
26
10
into account when defining markets, this analysis is carried out in a subsequent stage.27 The Commission’s
process to define the relevant market is done on the basis of preliminary information or information
submitted by the undertakings involved. The Commission will broadly establish the relevant markets based
on this information. In a product market the issue will often be to establish whether product A and product
B belong to the same product market.28 When it comes to geographical markets the Commission will take
a preliminary view of the scope of the market. This preliminary view is based on the distribution of market
shares between the parties and their competitors as well as a preliminary analysis of pricing and price
differences.29

2.4 Final thoughts on the economics of competition law

Economics continue to play an important role in competition law enforcement. It can be used to explain
the reasoning behind the legal rules and the practices of the European Commission. European competition
law has three goals: protecting the structure of the market, protecting competition as such and enhancing
consumer welfare. The Commission has made their economic reasoning in decisions and policy documents
more explicit, the results of which are clearly visible in the guidelines on article 101 TFEU. Therefore, the
Commission focusses more on protecting competition instead of protecting competitors. Throughout the
upcoming chapters we will continue to see the influence of economics in competition law regulation and
enforcement. I will discuss both the guidelines on article 101(1) and 101(3) TFEU, these guidelines contain
numerous economic assessments and clarify the practices of the Commission. The Compose project aims
to establish horizontal cooperation between companies, horizontal cooperation can help companies to
identify and exploit win-win situations, it enables companies to achieve both costs and qualitative
efficiencies. Within the logistics sector, horizontal cooperation is not yet researched to the full extent but
could be highly beneficial. Companies could combine transportation flows, share warehouses and storage
facilities and plan joint routes. This could result in cost savings due to a more efficient use of loading factors
of trucks and through combined route planning. Less trucks on the road and more efficient routes also
provide environmental benefits and a reduced carbon footprint. During the assessment of article 101(1)
TFEU, market definition can play an important role. This is an economic concept and in many cases lawyers
will call upon the services of economists to define the relevant markets. The Commission’s Notice on market
definition sheds some light on the practices used to define markets. Demand substitution is the most
important criteria, and in this context, a SSNIP test is used. However, supply substitutability and potential
competition could also play a role. In the upcoming chapters I will focus more on the legal framework
regarding article 101 TFEU and the possible risks of horizontal cooperation, both in general and focussed
on logistics.

27
28
29
11
Chapter 3: Legal Framework of Article 101(1) TFEU

3.1 An introduction to the legal framework of article 101(1) TFEU

The rule of article 101 TFEU sets out on of the two main provision of European competition law. In this
chapter I describe the legal context surrounding article 101 TFEU. This chapter is the first of two chapters
describing article 101 TFEU, this chapter covers article 101(1) and the next chapter covers article 101(3)
TFEU. Article 101(1) contains the main provision prohibiting agreements that restrict competition, article
101(3) contains the exemption that permits agreements to infringe article 101(1) TFEU if certain efficiencies
are gained.

Article 101(1) TFEU30
1. The following shall be prohibited as incompatible with the internal market: all agreements between
undertakings, decisions by associations of undertakings and concerted practices which may affect
trade between Member States and which have as their object or effect the prevention, restriction
or distortion of competition within the internal market, and in particular those which:
a. Directly or indirectly fix purchase or selling prices or any other trading conditions;
b. Limit or control production, markets, technical development, or investment;
c. Share markets or sources of supply;
d. Apply dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
e. Make the conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with
the subject of such contracts.

The text of article 101(1) TFEU prohibits all agreements which may affect trade between member states
and which have as their object or effect the prevention, restriction or distortion of competition within the
internal market. After this general rule, it sets out several ‘’hard-core’’ restrictions that will lead to a
violation of article 101 TFEU. To place this provision in its proper legal context there are several sources
that I want to discuss here. Firstly, the European Commission drafted guidelines that elaborate on article
101(1) TFEU and its application to horizontal cooperation agreements. While these guidelines are a form of
‘’soft law’’ and are not legally binding, they give insight in the system and its application to horizontal
cooperation agreements. Besides from the guidelines and other policy documents I also cover case-law laid
out by the European courts and opinions from legal authors in the field of European competition law.

30
Article 101 TFEU
12
3.2 Council regulation 1/2003

When discussing the legal framework of article 101 TFEU it is also important to include a brief description
of council regulation 1/2003. This regulation, drafted by the Commission, describes how the system of
European competition law is governed, how the legal procedures work and which courts have authority in
cases involving competition law. Important to note is that the regulation refers to article 81 of the Treaty
establishing the European Economic Community, this article has been replaced with article 101 TFEU
because of the establishment of the European Union. The regulation states that agreements which are
caught by article 101(1) TFEU shall be prohibited and that agreements which satisfy the conditions of article
101(3) shall not be prohibited, both without requiring a prior decision to that effect.31 Regulation 1/2003
introduced the system of self-assessment. It also regulates the burden of proof, which states that parties
or authorities claiming infringement of article 101(1) or article 102 EC must prove the infringement. The
burden of proof is substantial and must be supported by empirical evidence and a theory of harm.
Paragraph 3.5 will further cover the burden of proof. If the infringement has been proved and if the
infringing party wants to seek exemption under article 101(3), that party must prove compliance with article
101(3) TFEU.32 The regulation also covers the power of national competition authorities and courts. It grants
the national competition authorities (in the Netherlands, the ACM) the power to apply article 101 and 102
TFEU in individual cases. This includes the power to order interim measures and impose fines and
penalties.33 National courts derive power directly from the Treaty, this is also covered in article 6 of the
regulation.

3.3 Guidelines on the application of article 101 TFEU to horizontal cooperation

agreements

The guidelines on horizontal cooperation agreements provide an elaborate tool to assist companies in self-
assessment of their practices. In this section I will describe the most important paragraphs for horizontal
cooperation agreements. The guidelines will be explained in more detail throughout this chapter.
The guidelines set out that cooperation is of a ‘horizontal-nature’ when it occurs between actual or
potential competitors. It is important to note that horizontal cooperation agreements can also occur
between non-competitors, for example for companies active in the same product market but in different
geographical markets. The guidelines cover these as well.34 As discussed in chapter 2, horizontal
cooperation agreements can lead to substantial economic benefits, however, they could lead to restrictions
of competition as well. The guidelines also discuss the nature and content of the agreement and market

31
Council regulation no 1/2003, article 1
32
33
34
13
power and other market characteristics. These paragraphs do set out various theories of competitive harm
but are not among the clearest and well drafted provisions in the guidelines.35 Paragraph 32 describes the
factors that relate to the nature and content of an agreement: these include the area and objective of
cooperation, competitive relationship between parties and the extent to which they combine their
activities. These factors determine possible competition concerns that can arise.36 For example horizontal
cooperation agreements can limit the possibility of parties to compete against each other and it could lead
to a reduction of decision-making independence by contributing assets or because of parties’ financial
interests.37 A reduction of competition may cause competitors to increase their prices. Besides these
concerns, horizontal cooperation agreements could also lead to the disclosure of strategic information,
which could result into coordination between parties.38
The guidelines also cover specific types of agreements: research & development agreements, production
agreements, purchasing agreements, agreements on commercialisation and standardisation agreements.
In this section I briefly discuss agreements on commercialisation and standardisation, since these types of
agreements are the most relevant for horizontal cooperation between companies. Commercialisation
agreements involve cooperation between competitors in the selling, distribution or promotion of their
substitute products. The scope of commercialisation agreements can vary a lot. An example of a more
limited commercialisation of agreement may include agreements in the field of distribution.39 The
guidelines state that if competitors agree to distribute their substitute products on a reciprocal basis there
is a possibility that the agreement could have as their object or effect the restriction of competition.40 In
the context of increasing cooperation between companies it is possible that standardisation processes may
occur. Standardisation agreements include the definition of technical or quality requirements with which
products or production processes, services or methods may comply.41 Standardisation agreements can
produce significant benefits, for example by improving products and supply conditions. This can lead to
increases in competition and lower output and sales costs, which benefits the economy.42 Standardisation
can also lead to negative competitive effects, especially when it restricts price competition and limits or
controls production, markets and innovation.43 Standardisation may also restrict competition if access to
the standardisation processes are limited for certain companies. If a company is completely prevented from
obtaining access or can only obtain access on discriminatory results, there is a risk of an anti-competitive
effect. 44

35
Whish & Bailey, 2015, p.626-627
36
37
38
39
40
41
42
43
44
14
3.4 De Minimis Notice

The De minimis doctrine is the product of the Court of Justice in several cases. The Court stated in Völk v
Vervaecke that agreements that affect competition within the scope of article 101(1) must influence trade
between member states with a sufficient degree. There must be a significant effect on markets and
competition.45 This rule of double appreciability has been repeated by the courts since this case, most
recently in Expedia Inc v Autorité de la Concurrence. This case also added one refinement: agreements that
restrict competition by object and which influence trade between Member States automatically violate
article 101(1) without any need to demonstrate concrete effects on competition.46 The notice creates a safe
harbour for agreements with a market share below certain thresholds. For these agreements, a restriction
of competition is not appreciable. The main provision of the Notice is covered by paragraph 8. This provision
holds that agreements which may have as their effect the prevention, restriction or distortion of
competition within the internal market, do not appreciably restrict competition within the meaning of
article 101(1): if
• The aggregate market share held by the parties to the agreement does not exceed 10% on any of
the relevant markets affected by the agreement, where the agreement is made between
undertakings which are actual or potential competitors on any of these markets (agreements
between competitors).47
• The market share held by each of the parties to the agreement does not exceed 15% on any of the
relevant markets affected by the agreement, where the agreement is made between undertakings
which are not actual or potential competitors on any of these markets (agreements between non-
competitors).48

In cases where it is difficult to classify the agreement as either an agreement between competitors or an
agreement between non-competitors the 10 per cent threshold is applicable. It is clear to see from
paragraph 8 that the notice treats vertical agreements more generously than horizontal agreements,
allowing a higher threshold. The aggregate market share threshold of 10% covers horizontal cooperation
agreements and the aggregate market threshold of 15% covers vertical cooperation agreements. The
notice also takes the possibility of a slight growth in market share into account. Paragraph 11 states that
agreements do not appreciably restrict competition if the thresholds set out in paragraphs 8 to 10 do not
exceed the thresholds by more than 2 percentage points over two successive calendar years.49 What
happens when agreements outgrow the market share as set out in this notice is not entirely clear. It is
possible that the agreement becomes void or that it becomes unenforceable from the moment that the

45
CJEU 9 July 1969, C 5/69 (Völk v. Vervaecke) par 5 – 7
46
47
De minimis Notice, 2014, paragraph 8(a)
48
De minimis Notice, 2014, paragraph 8(b)
49
De minimis Notice, 2014, paragraph 11
15
notice ceases to apply.50 The legal certainty of the de minimis notice can be questionable. The Commission
will not pursue cases that fall below the thresholds but the same cannot be said of national courts and
competition authorities. The question whether national courts and competition authorities could deviate
from the de minimis notice was also discussed in the Expedia case. In this case the French Cour de cassation
asked a preliminary question about the possibility to deviate from the de minimis notice to the Court of
Justice. The preliminary question is stated in paragraph 13 of the ruling: ‘’Must article 101(1) TFEU and
Article 3(2) of Regulation (EC) No 1/2003 be interpreted as precluding the bringing of proceedings and the
imposition of penalties by a national competition authority, on the grounds of both article 101(1) TFEU and
the national law of competition, in respect of a practice under agreements, decisions of associations of
undertakings or concerted action that may affect trade between Member States, but that does not reach
the thresholds specified by the European Commission in its [de minimis] notice?’’ The Court points out that
Commission notices, such as de minimis, are not binding in relation to member states.51 The Court also
states that national authorities may take the thresholds of the de minimis notice into account when
determining whether or not a restriction of competition is appreciable, but that they are not required to
do so. Such thresholds constitute to just a few of the factors required for the authority to determine
whether or not a restriction is appreciable by reference to the actual circumstances in the agreement52 The
answer to the preliminary question is that article 101(1) TFEU and article 3(2) Regulation 1/2003 allow a
national competition authority to apply article 101(1) TFEU to an agreement that may affect trade between
member states but does not exceed the thresholds in the de minimis notice, provided that the agreement
has an appreciable restriction of competition within the meaning of that provision.53

3.5 Test of article 101(1) TFEU

The test under article 101(1) involves an assessment whether an agreement between undertakings, which
is capable of affecting trade between Member States, has an anti-competitive object or actual or potential
restrictive effects on competition.54 The EU courts have stated that the relevant market does not need to
be defined if it is possible, without market definition, to show that the agreement affects trade between
Member States.55

First, it is important to clarify the definition of ‘’undertaking’’. What constitutes an undertaking is not
defined by the Treaty but by the European Courts. The Court of Justice held that: ‘’the concept of an
undertaking encompasses every entity engaged in an economic activity regardless of the legal status of the

50
51
CJEU 13 December 2012, C-226/11 (Expedia / Autorité de la concurrence) par 29
52
53
54
55
CJEU 11 July 2013, C-439/11 (Ziegler SA / European Commission) par 63
16
entity and the way in which it is financed.’’56 In Pavlov the Court added that ‘’it had also been consistently
held that any activity consisting in offering goods or services on a given market is an economic activity.’’57
In the context of horizontal cooperation agreements within the logistics sector the term ‘’agreement’’ is
important as well. In the context of article 101 the General Court has given a broad interpretation to the
term agreement: ‘’the concept centres around the existence of a concurrence of wills between at least two
parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression
of the parties’ intention.’’58

A distinction is made between restrictions of competition by object and by effect. Restrictions by object
are those that have the potential to restrict competition by the very nature of the agreement.59 The
subjective intention of parties to restrict competition is not necessary to prove with object restrictions. It
can be relevant in the assessment.60 Restrictions by effect are more complex. If an agreement does not
restrict competition by object, it might restrict competition by effect. An analysis of actual and potential
effects must be made. Important parameters to deter if there is a restriction by effect are an adverse impact
on price, output, product quality, product variety or innovation.61 To assess whether agreements have anti-
competitive effects it is necessary to establish a ‘’counterfactual’’. Here a comparison must be made
between the actual legal and economic context in which competition would occur in absence of the
agreement (how it stands or how it is envisaged).62 Which agreements constitute a restriction by object is
a complex question to ask. The Court of Justice stated that there is no exhaustive list for restrictions of
competition by object, and that it is not limited to the examples of anti-competitive agreements given in
Article 101(1) itself.63 A few examples of what could constitute to restrictions by object in horizontal
agreements can include agreements to: fix prices, exchange information that reduces uncertainty about
future behaviour, share markets, limit output or sales, for collective exclusive dealing and to pay
competitors to delay the launch of competing products. 64 Restrictions by object include ‘’hard-core’’
restrictions on competition and often infringe article 101(1) TFEU. For restrictions by object it is much more
difficult to apply for the exemption of article 101(3), although this is not impossible. As stated before
restrictions by effect are much more complex. To answer the question whether effects infringe article
101(1) a more detailed analysis must be made. An illustration of the complexity of restrictions by effect can
be found in the Delimitis v Henniger Bräu AG case. The Court of Justice considered a provision in an
agreement between a brewery and a licensee of a public house owned by the brewery. In this provision the

56
CJEU 23 April 1991, C-41/90 (Höfner v Macrotron GmbH) par 21
57
CJEU 12 September 2000, C-180/98 (Pavlov) par 74
58
EGC 26 October 2000, T-41/96 (Bayer AG v. Commission) par 69
59
60
61
62
63
CJEU 20 November 2008, C-209/07 (Competition Authority v. Beef Industry Development Society Ltd) par 23
64
17
licensee was required to purchase a minimum amount of beer each year.65 To establish a violation of article
101(1) because of an effect restriction, the court took the following steps: first the relevant geographical
and product markets had to be defined.66 After defining the markets the court wanted to determine
whether entry to the market was impeded.67 If this was the case then it was necessary to ask if the
agreements by Henniger Bräu contributed to that foreclosure effect.68
As discussed before, when accusing companies of infringing article 101(1) by means of restrictions by effect,
the claimant or competition authority has the burden of proof. This will require the formulation of a ‘theory
of harm’. A theory of harm must show that an agreement which does not have an anti-competitive object
will lead to anti-competitive effects.69 The EU courts have also stressed that a theory of harm has to be
supported by empirical facts, for example in Visa Europe Ltd v Commission.70 Demonstration of restriction
competition by effect will require a substantial burden of proof. The next step in the effect analysis of an
agreement covers the establishment of a ‘counterfactual’.71 A counterfactual involves an assessment what
the position would have been in absence of the agreement. The comparison between the situation with
the agreement and without the agreement provides a view whether the agreements restricts competition
or not.72 The need to establish a counterfactual was illustrated in the 02 Germany GmbH v. European
Commission case. The General Court annulled a commission decision and concluded that infringement on
competition by the proposed roaming agreement could not be established because the Commission could
not show what the position would have been in absence of the agreement.73
Important to note is that certain clauses in contracts might have anticompetitive effects but the agreement
may fall outside the scope of article 101(1). If this is the case, then it is necessary to determine if the
restrictive clause is objectively necessary. The General Court explained the concept of ‘ancillary restraints’
in the Métropole television v Commission case: ‘ancillary restrictions’ cover any restriction which is directly
related and necessary to the implementation of a main operation.74
To summarize the test whether an agreement infringes article 101(1) TFEU is as follows: first there needs
to be an agreement between ‘undertakings’. Secondly the possible restriction needs to be defined. It could
be a restriction by object or by effect. Object restrictions include ‘’hard-core’’ restrictions like price fixing
and market sharing. If there is a restriction by object, the agreement is likely to infringe article 101(1) TFEU.
If there is no restriction by object it could be the case that the agreement restricts competition by effect.
Restrictions by effect require a full analysis to decide whether they restrict competition in the sense of
article 101(1) TFEU or not. It involves the definition of the relevant geographical and product markets,

65
66
CJEU 28 February 1991, C-234/89 (Delimitis / Henniger Bräu AG) par 16
67
CJEU 28 February 1991, C-234/89 (Delimitis / Henniger Bräu AG) par 19
68
CJEU 28 February 1991, C-234/89 (Delimitis / Henniger Bräu AG) par 24 - 27
69
70
EGC 14 April 2011, T-461/07 (Visa Europe Ltd v. European Commission) par 167
71
72
73
EGC 2 May 2006, T-328/03 (02 Germany GmbH v. European Commission) par 65
74
EGC 18 September 2011, T-112/99 (Métropole télévision / European Commission) par 104
18
identifying possible foreclosure effects, formulating a theory of harm, establishing a counterfactual and
looking at possible ancillary restraints. In both cases (object and effect restriction) it is still possible that the
infringement of article 101(1) TFEU is allowed. This is the case if the requirements of article 101(3) TFEU
are met. Article 101(3) TFEU will be covered in the next chapter.

3.6 European Night Services, Metropole Television v. Commission & Wouters

The following cases provide examples whether there is a restriction of competition under article 101(1)
TFEU. Specifically, they illustrate the views of the different courts on the balancing of ant- and pro-
competitive effects under article 101(1) TFEU, which has been subject to debate.
The European Night Services case was the high point of the trend in case law that required the overall anti-
competitive effects of agreements to be assessed in their economic context.75 The case involved setting up
a cooperative joint venture European Night Services by several railway undertakings from different EU
countries. The purpose of the joint venture was to operate routes between the UK and continental
destinations.76 The Commission found that the joint venture infringed article 101(1) TFEU and exempted
the agreements under article 101(3) TFEU but for a shorter duration then the length of the joint venture.
The Court stated that the first question is whether the agreement restricts competition by object or effect.
If there is a restriction by object these restrictions may be weighed against pro-competitive effects only in
the context of article 101(3) TFEU. If the agreements restrict competition by effect accounts should be taken
of the actual conditions in which the agreement functions, the economic context and the structure of the
market concerned.77 The Court did not exclude the balancing of negative and positive effects under the
assessment of article 101(1) in the effect analysis.78 The Court found that the Commission did not make an
adequate assessment in the economic and legal context in which the ENS agreements where concluded
and that it did not demonstrate a restriction of competition under article 101(1) TFEU.79 The European Night
Services case is important because it emphasizes the importance of assessing possible restrictive
agreements in its proper economic context, does not rule out the possibility of balancing positive and
negative economic effects under article 101(1) TFEU. Important to note is that this is limited to restrictions
by effect. Restrictions by object require a justification by article 101(3) TFEU and do not balance possible
positive effects under the 101(1) test.
In the Métropole television v. Commission case the Court of First Instance took a different stance concerning
the balancing of anti and pro-competitive effects under article 101(1) TFEU. The applicants stated that, as
a consequence of the existence of a rule of reason in EU competition law, when article 101(1) of the treaty

75
Nazzini, 2006, p.515
76
EGC 15 September 1998, T-374/94 (European Night Services) par 7 – 17
77
EGC 15 September 1998, T-374/94 (European Night Services) par 136
78
Nazzini 2006, p.516
79
EGC 15 September 1998, T-374/94 (European Night Services) par 229
19
is applied it is necessary to weigh the pro and anti-competitive effects of an agreement in order to
determine if the agreement is caught by article 101(1).80 The court states that it is only in the precise
framework of article 101(3) TFEU where pro and anti-competitive effects of a restriction may be weighed
and that the treaty would lose much of its effectiveness if such an assessment could already be carried out
under article 101(1) TFEU.81
The last case I want to discuss in the context of the assessment of anti and pro-competitive under article
101(1) TFEU is the Wouters case. In this case the Court of Justice ruled that regulations by the Dutch bar
association which prohibits lawyers from entering partnership with accountings did not restrict competition
in the sense of article 101(1) TFEU. The Court ruled that the prohibition did not restrict competition by
object and then proceeded to analyse if the prohibition restricted competition by effect. This restriction by
effect was established in paragraph 86 of the ruling. The Court established that there was potential demand
for a service of combined lawyers and accountants on the market.82 The court also states that there are
possibilities that would restrict competition to a lesser extent than the measures proposed by the Dutch
bar association.83 The Court concludes that competition is restricted.84 However, the Court then proceeds
with a second test to see if the restrictive agreement falls within the scope of article 101(1). The Court
states that for the purpose of the application of article 101(1) account must be taken of the overall context
in which the decision was taken and produces effects. The objectives of the agreement must be taken into
account.85 The Court then proceeds to conclude that the regulation does not go beyond what is necessary
to ensure the proper practice of the legal profession.86 The regulations did not infringe article 101(1) TFEU.
In this case we can see that pro-competitive effects and non-competitive objectives are taken into account.
In paragraph 97 the Court describes the objectives of the regulations that should be taken into account.
Examples include professional ethics, supervision and liability. These objectives relate to the quality of the
service of the legal profession and can therefore be seen as pro-competitive effects.87The conclusion of the
Court in paragraph 109 can be seen as a public policy objective, it ensures the proper practice of the legal
profession.88
These cases illustrate a different way of balancing pro- and anticompetitive effects under article 101(1) and
they provide different views on an infringement of article 101(1) TFEU. The European Night Services case
emphasizes that agreements should be assessed in their proper economic context and leaves some room
for the balancing of pro and anti-competitive effects under article 101(1) TFEU if the infringement concerns
a restriction by effect. In the Métropole television v Commission case a different position is taken whether

80
81
82
CJEU 19 February 2002, C-309/99 (Wouters / Nederlandse Orde van Advocaten) par 87
83
84
85
86
87
88
20
pro- and anticompetitive effects can be considered under article 101(1) TFEU. A rule of reason in EU
competition law is rejected and the weighing of competitive effects can only be done under article 101(3)
TFEU. Finally, Wouters applies a more elaborate test under article 101(1) TFEU and takes both pro-
competitive and public interest objectives into account. It concludes that there is no infringement of article
101(1) TFEU. The general rule is established by Métropole television v Commission: a rule of reason in EU is
rejected and the assessment of pro- and anticompetitive effects is part of the test under article 101(3)
TFEU.89 However, an exception is made by Wouters in the case of public interest objectives. This is an
example of a more elaborate assessment under article 101(1) TFEU. For the Compose project this illustrates
clearly that a restrictive effect on competition and possible pro-competitive effects and economic
efficiencies are two separate issues. In general, it is not possible to compensate a restrictive agreement
under article 101(1) TFEU, only when an agreement has been found to restrict article 101(1) TFEU it is
possible to comply with the article 101(3) TFEU exemption. There is however, room to analyse the
agreement under article 101(1) TFEU in its proper economic context, but this does not involve a full
assessment of pro- and anticompetitive effects.

3.7 Information exchange under 101(1) TFEU

3.7.1 Information exchange: introduction

An important subject in the context of horizontal cooperation agreements are exchanges of information.
When multiple parties work together they often share different kinds of information and data, which may
lead to competition problems. The guidelines on horizontal cooperation agreements also discuss this issue
and draw heavily on the case law of the EU courts.90 The guidelines recognize that information exchange
may solve information asymmetries, thereby making markets more efficient, but they also state that it may
lead to restriction of competition. This is particularly the case when information exchange enables
undertakings to be aware of market strategies of their competitors.91 It can become a problem when
information exchange leads to coordination. Information exchange has the potential to create transparency
in the market, hereby the exchange of strategic information can facilitate coordination of competitive
behaviour. This is the possible collusive outcome of information exchange.92 Information exchange can also
lead to anti-competitive foreclosure. Foreclosure can take place on the same market where the exchange
takes place. This happens when information is exchanged to unaffiliated competitors causing a significant
competitive disadvantage as compared to other competitors.93 Information that reduces strategic
uncertainty is more likely to infringe article 101(1) TFEU than other types of information. Strategic

89
See ‘Whish & Bailey, 2015, p.145’ & ‘Nazzini, 2006, p.520’
90
91
92
93
21
information can include prices, quantities, customer lists, production costs and many more. Generally,
information related to prices and quantities is the most strategic, followed by information about cost and
demand.94 Especially these types of information create artificially increased transparency, which eliminates
the uncertainty that provides a motivating force in competitive markets.95 A distinction can be made
concerning information exchange about historical information and information about future behaviour.
Historical information is less likely to infringe competition. Information exchange is also more likely to result
in an infringement of competition when participants operate in a concentrated market or where they
represent a substantial market share.96 Because of the general nature of these rules it remains difficult to
distinguish information exchange with a restrictive effect on competition from neutral information
exchange. The assessment of information exchange must be done on a case-by-case basis and within the
economic context.97 In his article A. Copabianco summarizes qualifications made within the economic
literature. It concerns cases where artificially increased transparency is a leading factor in collusion and
cases where it has pro-competitive effects and therefore needs to be encouraged.98 These qualifications
include the following: communications about future conduct facilitates collusive practices, private
communications (between competitors only) is more likely to result in collusive behaviour than public
communications99, exchanges of information concerning prices or quantities are generally of much greater
importance given that these types of information reveal competitors’ actions directly and disaggregated
information helps firms in sustaining collusive equilibria100. These qualifications are also covered in the
Commission’s guidelines.
To assess whether information exchange leads to an infringement of competition it is important to
distinguish the different types of information exchange and assess the situation in its proper context.
Information exchange in support of horizontal cooperation agreements should be assessed in combination
with the agreement.101 In the logistics sector this could include an agreement between parties sharing
information about transport costs.

3.7.2 Information exchange: assessment under article 101(1) TFEU

Information exchange can restrict competition by object, especially when the information concerns future
conduct or intentions regarding prices or quantities.102 Given the intent of the Compose project, restrictions
by effect are more likely to occur than restrictions by object. However, it remains important to clearly

94
95
Capobianco, 2004, p.1256
96
97
98
99
Kühn & Vives, 1994
100
Kandori, Michihiro & Matsushima, 1998
101
102
101(1) Guidelines to horizontal cooperation agreements, paragraph 73-74
22
emphasize the risks of communicating strategic information, especially prices or quantities, and especially
with competitors. Information exchange can also have restrictive effects on competition if the exchanges
support an agreement that is not in itself anti-competitive, but might have anti-competitive effects.103
These ‘pure’ exchanges of information can infringe article 101(1) TFEU in their own right.104 Information
exchanges in this context require a full effect analysis in its market context, this was made clear by the Court
of Justice in the Asnef-Equifax case: ‘’the compatibility of information exchange within EU competition rules
cannot be assessed in abstract. It depends on the economic conditions on the relevant markets and on the
specific characteristics of the system concerned.105 Examples include the type of information, public or
confidential, aggregated or detailed, historical or current and the periodicity of such information and its
importance for fixing prices, volumes and conditions of service.’’106 This case illustrates that information
exchange, as most problems in competition law, requires a case-by-case analysis. It also illustrates the types
of information which shouldn’t be shared, or only with absolute caution. After discussing the possibility of
a collusive outcome, possible foreclosure effects, restrictions by object or effect, the guidelines discuss two
issues related to economic theory: the economic conditions on the relevant markets and the characteristics
of the information exchanged. The market characteristics are discussed in paragraphs 77 – 85 of the
Guidelines. Paragraph 77 summarizes in which market characteristics could lead to coordination and
collusive outcomes between companies. Companies are more likely to achieve a collusive outcome when
markets are sufficiently transparent, concentrated, non-complex, stable and symmetric.107 The paragraphs
that follow explain these characteristics more in-depth. When setting up horizontal cooperation
agreements between companies it is important to look at the different market characteristics of the
companies involved to determine which information can be exchanged and what will be the likelihood of
possible collusive outcomes. The UK Agricultural Tractor Registration Exchange case provides a clear
example of how market characteristics may determine the Commission’s decision: in this case the
Commission argued that an information exchange system was restricting competition and within this
argumentation it placed emphasis on the fact that the tractor market in the UK was oligopolistic: four firms
had a combined market share of 80 per cent.108 This oligopolistic market leads to high entry barriers, the
market of agricultural tractors is further characterized by high entry barriers due to brand loyalty, a
declining market, the market share of the members of the information exchange system and the
characteristics of the information exchange system.109 According to the Commission, the exchange of
information leads to a restriction of competition for two reasons. Firstly, it prevents competition in a highly
concentrated market. It creates a degree of transparency between the suppliers, and in a highly

103
104
105
CJEU 23 November 2006, C-238/05 (Asnef-Equifax / Ausbanc) par 54
106
CJEU 23 November 2006, C-238/05 (Asnef-Equifax / Ausbanc) par 54
107
108
EEC 17 February 1992, 92/157 (UK Agricultural Tractor Registration Exchange) (Commission decision) par 5
109
23
concentrated market, this is likely to destroy what hidden competition there was left.110 Secondly, the
system of information exchange increases the entry barriers for non-members. If a supplier chooses not to
become a member of the information exchange, he is at a disadvantage due to a lack of available and
detailed market information, and if he does become a member he needs to reveal his retail sales by both
product and small geographical area. This allows market dominators to immediately detect new entrants.111
The Court rules that there is an infringement of article 101(1) TFEU, and that the exemption of article 101(3)
TFEU is not applicable, due to failure to comply with the indispensability condition. The exchange of
information was ordered to immediately be put to an end.112 This case provides a clear example of the
importance of market characteristics when assessing information exchange. Besides this it illustrates the
possible dangers of an open information exchange system, especially when market dominators can use it
to specifically detect new entrants in the market.

3.7.3 Information Exchange: points of attention

To illustrate information exchange as clear as possible for the Compose project, I provide the highlights and
most important points in this paragraph. I want to emphasize that the assessment of information exchange
occurs on a case-by-case basis within its proper economic context. Therefore, it is difficult to provide
general rules for the determination whether exchange of information is allowed. On the following page, I
provide a two-part checklist. Please note that this is not an exhaustive checklist and merely intended to
provide general guidance about important points to consider when exchanging information. The left part
of the checklist covers general principles that illustrate why information exchange can be a competition law
issue. Within the Compose project it can be used to illustrate practices that should be avoided. For example,
when setting up horizontal cooperation agreements between undertakings this should not lead to
coordination among a few of these undertakings (if they are competitors). Besides this information
exchange should not lead to foreclosure of other undertakings, this can be the case of undertakings are not
part of the information exchange and therefore are at a disadvantage. At the right side, I provided a
checklist that specifies the types of information that should be dealt with carefully. It is not the case that
these types of information cannot be exchanged but they are more sensitive to infringing competition law.
Especially information about prices or quantities can cause competition concerns. I advise not to share
these types of information.

110
111
112
24
Why is information exchange troublesome from a
Points of attention when exchanging information
competition law perspective?
IE enables undertakings to be aware of market strategies of IE reducing strategic uncertainty most likely to infringe 101(1)
their competitors TFEU
Strategic information includes: prices, quantities, customer

IE can lead to coordination between undertakings
lists, production costs, turnovers, sales
Strategic information includes: capacities, qualities, marketing

IE can lead to foreclosure of undertakings
plans, risks, investments, technologies, R&D
IE can reduce decision-making independence by reducing

Most strategic: IE about prices, quanties, cost, demand
incentives to compete
Historical information is less likely to infringe article 101(1)

TFEU than infromation about future behaviour
Infringement of article 101(1) TFEU is more likely if

participants represent a substantial market share
Companies are more likely to achieve a collusive outcome

when markets are sufficiently transpartent, non-complex and
symmetric
Exchange of public information is not likely to infringe article

101(1)
Exchange of aggregated data is less likely to infringe article

101(1) than company level data
Disclosure of information can also constitute to aconcerted

practice
25
3.8 Conclusion on article 101(1) TFEU

In this chapter I discussed the system of article 101(1) TFEU and the most important regulations and policy
documents from the Commission that assist in regulating and explaining the system. The guidelines on
horizontal cooperation agreements can be used to assess the proposed cooperation agreements. They give
insights on the possible benefits of horizontal cooperation agreements but also on the risks. In the
assessment of horizontal cooperation agreements, the ‘’De Minimis’’ notice is useful. It creates a safe
harbour for agreements that cover less than 10 or 15% of the market share. Given the context of the
Compose project, involving both small and big companies, this opens the possibility of horizontal
cooperation and provides more security for agreements with a low combined aggregate market share.
However, the notice is not accepted by the courts to its full extent and deviation is possible. If horizontal
cooperation agreements infringe article 101(1) TFEU, this will likely be an infringement by ‘’effect’’. Given
the objective and nature of the proposed agreements between shippers there it is not likely that there will
be a restriction by object, however this is not impossible. As explained restrictions by effect require a more
detailed analysis, leaving more room for interpretation and uncertainty. Case law suggests that agreements
should be assessed in their proper economic context and that public policy objectives can be considered
under article 101(1) TFEU, although this is still an area of uncertainty. Information exchange could also lead
to a restriction of competition within the scope of article 101(1) TFEU, this is the case when sharing of
information or data leads to coordination. Therefore, before setting up cooperation agreements it is
important to identify types of information that should not be shared, most importantly, strategic
information. The burden of proof that horizontal cooperation agreements restrict competition is the sense
of article 101(1) TFEU lies with the claimant or authority that accuses the parties of infringing competition.
This burden of proof is substantial and should be supported by empirical evidence and a theory of harm.
General remarks concerning article 101(1) TFEU Test of article 101(1) TFEU
Horizontal cooperation is beneficial for parties but could

Is there an ''Agreement'' between ''undertakings''?
restrict competition under article 101(1) TFEU
Agreements that cover less then 10/15% market share are Does the agreement restrict competition by ''object'' or
protected by the ''Deminimis'' notice ''effect''?
Restriction by object? Infringement of article 101(1) TFEU

Deminimis notice provides indication, courts may deviate
more likely, exemption of article 101(3) TFEU more
from the notice
difficult
Information exchange may lead to an infringement of Restriction by effect? Full analysis required to determine if
article 101(1) TFEU, especially strategic information article 101(1) is infringed
Restriction by effect analysis: market definition,

Burden of proof is substantial and must be supported by
identifying foreclosure effects, theory of harm,
empirical evidence, rests on claimant/accusing authority
counterfactual, ancillary restraints

26
Chapter 4: Legal framework of article 101(3) TFEU

4.1 An introduction to the legal framework of article 101(3) TFEU

Article 101(3) TFEU creates an exemption to the prohibition of article 101(1) TFEU. It provides a defence for
undertakings if an infringement of article 101(1) TFEU has been established. Agreements that are caught
by article 101(1), but which satisfy the criteria of 101(3) are valid and enforceable, without requiring a prior
decision to that effect.113 If the proposed horizontal cooperation agreements would be found to infringe
article 101(1) TFEU it is possible to meet the requirements of article 101(3) TFEU and therefore the
agreement would still be allowed. Article 2 of regulation 1/2003 states that the burden of proof for an
infringement of article 101(1) TFEU is for the Commission, the national competition authority or the person
opposing the agreement. However, if an undertaking wants to defend an infringement by applying for an
101(3) defence it must demonstrate that the agreement meets the requirements. Therefore, it is important
to analyse what kind of economic efficiencies the proposed horizontal cooperation agreements create, and
if these would be sufficient for an article 101(3) TFEU exemption. In this chapter I explain the test of article
101(3) TFEU according to the four conditions as stated in the Guidelines on the Application of Article 101(3)
TFEU.

4.2 Guidelines on the application of article 101(3) TFEU

The Commission provides guidelines for the application of article 101(3) as well. According to paragraph 34
of the guidelines the application of article 101(3) is subject to four cumulative conditions, two positive and
two negative: (i) the agreement must contribute to improving the production or distribution of goods or
contribute to promoting technical or economic progress; (ii) consumers must receive a fair share of the
resulting benefits; (iii) restrictions must be indispensable to the attainment of these objectives and lastly
(iv) the agreement must not afford the parties the possibility of eliminating competition in respect of a
substantial part of the products in question.114 According to paragraph 42 of the guidelines and to settled
case law these four conditions are cumulative. They must all be fulfilled for the exemption to apply. The
exemption of article 101(3) only applies if these conditions are met, if material changes occur it may cease
to apply.115 The exemption of article 101(3) TFEU can be interpreted broadly, the Court of Justice has stated
in Pierre Fabre that: ‘’An undertaking has the option, in all circumstances, to assert, on an individual basis,
the applicability of the exemption provided for in article 101(3) TFEU.’’116 This is also mentioned in
paragraph 46 of the guidelines. Article 101(3) does not exclude a priori certain types of agreements from

113
101(3) Guidelines, paragraph 1
114
115
116
CJEU 13 October 2011, C-439/09 (Pierre Fabre) par 57
27
its scope. All restrictive agreements that fulfil the four criteria are covered by article 101(3) TFEU.117 This
means that even object restrictions could be allowed, even though these ‘’hard-core’’ restrictions are far
less likely to fulfil the four criteria.

4.2.1 Different views on article 101(3) TFEU

The guidelines of the Commission and the wordings of article 101(3) TFEU suggest that the Commission and
the EU courts adopted a narrow view of the article. The wordings of article 101(3) which speak about
improvements to production or distribution and to technical and economic progress, suggest an efficiency
standard.118 The guidelines drafted by the Commission also focus heavily on economic efficiency. This can
be seen from the terminology used, for example in paragraph 11 talks about ‘’pro-competitive effects’’ that
may outweigh ‘’anti-competitive’’ effects. Paragraph 32 describes the general exemption rule of 101(3) and
speaks of an assessment of ‘’positive economic effects’’ of restrictive agreements. In conclusion paragraph
42 adds that ‘‘goals pursued by other Treaty provisions can be considered only to the extent what they can
be subsumed under the four conditions of Article 101(3).’’119
However, debate about the scope of article 101(3) is increasing and a broader approach would suggest that
other policy objectives can be considered. This would open the door for environmental benefits,
employment benefits, cultural aspects and maybe more. Important to note is that I focus on economic
efficiencies and the approach of the European Commission in my thesis. Lieke van Daele will focus on other
benefits and efficiencies related to other policy objectives in her thesis.

4.2.2 First condition of article 101(3) TFEU: Efficiency gains

According to the first condition the agreement must contribute to improving the production or distribution
of goods or contribute to promoting technical or economic progress. This means that the agreement must
have objective benefits for the European community, and not just for the parties themselves.120 The
requirements that an agreement most contribute to improving production or distribution of goods or
contribute to technical or economic progress overlap and the Commission has taken more than one, or
even all, of these requirements into account.121 The purpose of the first condition is to determine which
types of efficiencies can be taken into account for the further tests of the second and third conditions of
article 101(3). The aim of first condition is to ascertain what the objective efficiencies created by the
agreement are and what the economic importance of these efficiencies is.122 Paragraph 51 further clarifies
what must be verified in the assessment of efficiencies: (a) the nature of the claimed efficiencies; (b) the

117
118
119
120
CJEU 11 September 2014, C-382/12 (Mastercard / European Commission) par 234
121
122
28
link between the agreement and the efficiencies; (c) the likelihood and magnitude of each claimed
efficiency; and (d) how and when each claimed efficiency would be achieved.123 All objective economic
efficiencies are caught under the scope of article 101(3) TFEU124 The guidelines make a distinction between
cost efficiencies and qualitative efficiencies, but these are not exhaustive. Paragraphs 64 – 68 of the
guidelines cover cost efficiencies. Cost efficiencies include the development of new production
technologies and methods, synergies, economies of scale and economies of scope. Paragraphs 69 – 72 cover
qualitative efficiencies. Particularly cited here are research and development agreements, combination of
complementary assets, license agreements and distribution agreements. The first condition gives an
impression of the types of efficiencies that are eligible for an article 101(3) TFEU exemption. It clearly
focusses on economic efficiencies like the production or distribution processes of goods and the
technological and economic benefits in general. The last three conditions impose further requirements on
the efficiencies eligible for article 101(3) TFEU.

4.2.3 Second condition of article 101(3) TFEU: Fair share for consumers

The second condition requires that consumers receive a fair share of the efficiencies generated by the
restrictive agreement.125 Consumers in the context of article 101(3) TFEU are the consumers of the parties
to the agreement and subsequent purchasers.126 What constitutes a ‘’fair share’’ is explained in paragraph
85 of the guidelines. It implies that the pass-on benefits must at least compensate consumers for any actual
or likely negative impact found under article 101(1) TFEU. If consumers are worse off, the second condition
is not fulfilled.127 It is sufficient that benefits of the agreement compensate negative aspects, it is not
required that every efficiency is passed on to consumers.128 The second condition incorporates a ‘’sliding
scale’’, the greater the negative effects under article 101(1) TFEU the greater must be the efficiencies to
consumers.129 In terms of cost efficiencies, paragraph 98 points out that consumers are more likely to
benefit from cost reductions in a party’s variable costs then fixed costs. Variable costs determine as a
general rule output and pricing decisions of profit maximising undertakings.130 Paragraphs 102 to 104 cover
the qualitative efficiencies such as new and improved products that compensate for anticompetitive
effects. The second condition makes clear that restrictive agreements must be beneficial for consumers and
in a fair way. When applying for a 101(3) TFEU exemption it is important to make sure that the efficiencies
gained are benefit consumers proportionally related to the benefits for the companies involved.

123
124
125
126
127
128
129
130
29
4.2.4 Third condition of article 101(3): indispensability of the restrictions

The third condition imposes a proportionality test, it requires that the restrictive agreement must not
impose restrictions, which are not indispensable for the efficiencies created by the agreement in question.
The guidelines create a two-fold test: the restrictive agreement must be reasonably necessary to achieve
the efficiencies and the individual restrictions of competition in the agreement must also be reasonably
necessary for the attainment of the efficiencies.131 Paragraphs 75 – 77 elaborate on the first part of the
two-fold test. Paragraph 75 states that to assess whether the agreement is reasonably necessary market
conditions and business realities facing the parties of the agreement must be considered. Business
judgement is left over to the parties and will not be second-guessed by the commission unless there are
realistic alternatives.132 The second part of the test is mentioned in paragraph 78. After it has been
established that the agreement is necessary to produce the efficiencies, the indispensability of individual
restrictions flowing from the agreement must be assessed.133 Are the individual restrictions reasonably
necessary to produce the efficiencies? The answer is given by paragraph 79: A restriction is indispensable if
its absence would eliminate or significantly reduce the efficiencies created by the agreement or that its
absence will make it less likely that the targeted efficiencies will materialise.134 This proportionality tests
makes sure that competition is only restricted if it is necessary, both from the agreement and from the
individual restrictions that might be caused by the agreement.

4.2.5 Fourth condition of article 101(3) TFEU: No elimination of competition

The fourth condition requires that the restrictive agreement does not eliminate competition in respect of
a substantial part of the products concerned.135 In the end competition and the protection of rivalry is given
priority over benefits resulting from restrictive agreements.136 The guidelines state rivalry is an essential
driver for economic efficiency and innovation. In conclusion, short term efficiency gains are outweighed by
long term efficiencies that are generated from competition and rivalry. The fourth condition implies a
comparison between competition before and after the restrictive agreement. It compares the degree
competition before the agreement and the impact on competition of the agreement. The greater the
reduction of competition caused by the agreement is, the more likely it is that the fourth condition will not
be fulfilled.137 Paragraph 108 elaborates on the scope of the fourth condition. It requires an analysis of the
different sources of competition in the market, the level of competitive constraint that they impose on
parties of the agreement and the impact of the agreement on this competitive constraint. Both actual and

131
132
133
134
135
136
137
30
potential competition is considered. Paragraphs 109 – 116 of the guidelines elaborate more on the further
assessment whether an agreement restricts competition in the sense of the fourth condition of article
101(3) TFEU or not.

4.3 Block exemptions under article 101(3) TFEU

The guidelines on the application of article 101(3) TFEU explain the concept of block exemption regulations.
The exemption of article 101(3) TFEU can apply to individual agreements or categories of agreements by
way of block exemptions. Agreements covered by block exemptions remain enforceable despite their
infringement of article 101(1) TFEU. Agreements that are covered by a block exemption are valid without
specific authorization.138 Block exemptions could be valuable because if an agreement is covered by a block
exemption, there is no need to determine its possible infringement of article 101(1) TFEU in the first
place.139 Paragraph 2 of the guidelines do point out that a block exemption can be formally withdrawn by
the European Commission. Each block exemption contains an expiration date and the Commission will
review block exemption regulations that are about to expire.140 A national court cannot withdraw the
protection of a block exemption.141 Relevant block exemptions for logistic cooperation between shippers
include: Council Regulation 169/2009 which provides block exemptions for small and medium-sized
undertakings in the field of transport by road, rail or waterway.142 Council Regulation 2821/71 might be
relevant as well, since it grants block exemption in respect of standardisation agreements. Processes of
standardisation could occur when setting up horizontal collaboration between shippers. Whether processes
of standardization occur within the proposed horizontal cooperation agreements, depends on the nature
of the cooperation and should be determined in the future.

4.4 Conclusion on article 101(3) TFEU

In the fourth chapter I have focussed on the exemption of article 101(3) TFEU, mainly from an economic
perspective. The exemption rule of article 101(3) TFEU is broad in scope, and an undertaking is always free
to meet the requirements of the article. The guidelines by the Commission explain the requirements of the
exemption in more detail, these guidelines focus heavily on economic efficiencies. Four cumulative criteria
must be met: (i) the agreement must contribute to improving the production or distribution of goods or
contribute to promoting technical or economic progress; (ii) consumers must receive a fair share of the
resulting benefits; (iii) restrictions must be indispensable to the attainment of these objectives and (iv) the
agreement must not eliminate competition. These requirements determine the scope of the efficiencies

138
139
140
141
142
31
that can be considered under article 101(3) TFEU, mainly cost and qualitative efficiencies. It emphasizes
that consumers must receive a fair share of resulting benefits. This illustrates that beneficial effects that
are limited to the companies involved, will not qualify towards an exemption under article 101(3) TFEU.
Restrictions on competition also need to be proportionate, this applies to both agreements and individual
restrictions. Finally, the Commission emphasizes that in general competition as a long term goal has priority
over short term beneficial effects. These four conditions must be met in order to qualify for an exemption
under article 101(3) TFEU, this requires no prior decision. If the criteria are met, agreements are protected.
However, the burden of proof of compliance with article 101(3) TFEU rests on the companies that seek
exemption under this rule. In the upcoming chapter I will apply the exemption rule to the proposed
efficiencies and pro-competitive effects that are generated by the Compose project. In the following figure,
I provide a checklist with the most important general remarks about article 101(3) TFEU and the four
cumulative conditions of article 101(3) TFEU.

General remarks about article 101(3) TFEU Test of article 101(3) TFEU
Agreement must contribute to improving production or

Exemption of article 101(3) TFEU is broad in scope:
distribution of goods or contribute to promoting
undertakings are free to apply
technical or economic progress
Burden of proof rests on undertaking seeking Consumers must receive a ''fair share'' of resulting
exemption benefits
Restrictions must be indispensable to the attainment of

EU Commission and its guidelines: focus on economic
these objectives: two fold test: agreement proportional
efficiencies
and individual restrictions proportional
Agreement must not eliminate competition in a

Four cumulative criteria have to be met (exhaustive list)
substantial part of the market
32
Chapter 5: Compose

5.1 The Compose Project

In this chapter I cover the application of the legal framework to the Compose project. This chapter starts
with a description of the current rationale and ideas behind the Compose project, based on these facts I
provide recommendations to keep in mind when setting up horizontal cooperation agreements between
companies. Companies within the Compose project vary in the products and services they offer, companies
include both small, medium and large companies. Both the general rule of article 101(1) TFEU and the
exemption of article 101(3) TFEU to the Compose project are covered in this chapter. The Compose project
aims to set up horizontal cooperation between companies to cooperate, share best practices and learn
from each other in several areas. One of these areas could include logistics optimization, but the
expectation is that the scope of cooperation is not limited to logistics. The aim of the project is to reach a
breakthrough within horizontal cooperation, specifically in the field of logistics. The matching of companies
is an important first step in achieving the best possible horizontal cooperation, to do this evofenedex wants
to develop a ‘matchmaking tool’, this tool aims to match companies across different sectors and to reach a
physical and cultural fit between companies. The next step includes the development of a network
matching tool, which is more is more focussed on strategic alignment. The objective is to match networks,
combine transportation flows and optimize supply chain between the companies matched under the first
tool.
The optimization of logistics is one of the examples in which companies can collaborate horizontally.
Combining transportation flows could be highly beneficial for companies involved. Companies often don’t
pay much attention to the optimization of their supply chain, they rely on Logistic Service Providers (LSPs),
these LSPs have a limited portfolio of companies and therefore cannot optimize the supply chain. This leads
to a lower load capacity for trucks on the roads, which results in unnecessary costs and environmental
effects. If companies match in an earlier stage and approach LSPs together, a better fit could be reached,
resulting in more efficient transportation flows. This is only one example of the options of cooperation,
companies could benefit from each other’s best practices, innovate together and help with sector specific
issues, for example the transportation of toxics. These specific issues cannot always be tackled by
companies alone.
Still up for discussion within the project is the governance structure, the cooperation between companies
could be governed by a neutral third party. This party would keep an overview of the matching and
networking process and could evaluate the functioning of the project. It is possible that evofenedex will
take on this role, although this has not yet been decided. An independent third party governing the different
kinds of cooperation could have benefits from a competition law perspective. It could offer guidance in
complying with competition law regulations and advice on best practices. Besides this it might take some
33
of the competition law concerns away. It could for example maintain the free entry to the platform, which
reduces entry barriers and information asymmetries within the markets.

5.2 Article 101(1) TFEU and Compose

In this section I provide guidance on setting up horizontal cooperation agreements under the Compose
project to keep the possibility of infringing the general rule of article 101(1) TFEU to a minimum. evofenedex
wants to develop a matchmaking and a network tool to organize horizontal cooperation. Generally, it is
important to look at the types of companies that are going to be matched under this tool. This of course
depends on the possibilities and advantages of cooperation, but companies that are direct competitors and
have larger market shares will always increase the possibility of infringing article 101(1) TFEU.

Article 101(1) TFEU
''Agreement''
between
''undertakings''
Restriction by Restriction by
object (hard-core effect (full analysis
restrictions) required
Definition of the
relevant market Identify possible Establishing a Establsihing a
Ancillary restraints
(geographical and foreclusore effects theory of harm counterfactual
product market)

The above figure illustrates the steps that must be taken by another party, for example the Commission or
the Dutch authority for consumers and markets, when accusing a company of infringing article 101(1) TFEU.
For a full description of each step I refer to paragraph 3.6 of this thesis. For article 101(1) TFEU to apply
there needs to be an ‘’agreement’’ between ‘’undertakings’’. As stated previously an undertaking
encompasses every entity engaged in economic activity regardless of legal status and the way it is financed,
economic activity includes offering goods or services on a given market. The companies that would
cooperate within the Compose project would therefore qualify as ‘’undertaking’’ in the Treaty. In addition,
there is a requirement for an agreement between undertakings. An agreement has a broad interpretation
in this context, and centres around the concurrence of wills between at least two parties. The form of this
concurrence of will is of lesser importance. It is safe to say that when parties cooperate horizontally there
34
is a concurrence of wills. After that the alleged restriction must be defined. This can be either by a restriction
by object or a restriction by effect. Restrictions by object include ‘’hard-core’’ restrictions like price fixing
and sharing of markets. Whether a restriction by effect infringes article 101(1) requires a full analysis. This
analysis includes multiple aspects, the relevant geographical and product market needs to be defined,
possible foreclosure effects need to be identified, a theory of harm must be established and possible
ancillary restraints need to be reviewed. In conclusion, this results in a substantial burden of proof for the
party claiming infringement of article 101(1) TFEU. In the Compose project it is therefore important to
refrain from restricting competition by object. Besides refraining these restrictions, I advise to review each
cooperation agreement individually to determine if the agreement could have anti-competitive effects. In
cases with cooperation between direct competitors or where large market shares are involved I advise to
seek the council of competition law experts, since competition law is applied on a case-by-case basis it is
difficult to provide clear rules of compliance. In the following figure, I have outlined several points of
attention that need to be considered when creating the matchmaking and networking tool and when
organizing horizontal cooperation between companies.

Information that
Cooperation that
should not be Points of attention Recommendations
should be avoided
shared
Article 101(1) burden Assess agreements

Information that of proof rests on that have an
Price fixing/cartelising reduces strategic authority/claimant aggregated market
uncertainty that accuses share bigger then
infringement 10/15% carefully
Deminimis notice
limit or control Examples: prices, creates safe harbour Avoid ''hard-core''
production/share quantities, customer for agreements with restrictions like price
markets lists, production costs less than 10/15% fixing
market share
Deminimis notice
Exchange information Historical information Closely analyse the
provides guidance,
that reduces strategic less likely to infringe information
not always accepted
uncertainty competition law companies share
by courts
Competitive In some cases, pro-

IE more likely if
disadvantage: apply competitive effects
participants operate in If in doubt: ask for
dissimilar conditions are taken into account
a concentrated council
to equivalent under article 101(1)
market
transactions TFEU
IE more likely if
participants represent
a substantial market
share

Note: IE = Information Exchange

35
5.3 Article 101(3) TFEU and Compose

If an agreement under the Compose project would have been found to infringe competition in the sense of
article 101(1) TFEU, it is possible to apply for the article 101(3) TFEU defence. This article creates an
exemption for agreements that have a restrictive effect on competition. Agreements with a restrictive
effect on competition can be allowed if they provide sufficient efficiencies. As stated before, the burden of
proof when accusing a company of infringing competition lies with the claimant, however, if an
infringement under article 101(1) TFEU has been established, the burden of proof to apply the article 101(3)
TFEU defence lies with the company invoking the defence. In order to qualify for the exemption four
cumulative criteria have to be met, I discuss these with a focus on the efficiencies gained by the Compose
project in this section. Before addressing the different requirements, it is necessary to identify the most
important efficiencies gained from the Compose project, these efficiencies are projected in the next
illustration.

These efficiencies should be applied to the criteria of article 101(3) TFEU. In the next section I discuss the
four cumulative criteria of article 101(3) TFEU in more detail, and provide an application of these criteria to
the efficiencies from the Compose project. This could be used as a basis of argumentation for a possible
exemption.
36
First condition of article 101(3): efficiency gains

The purpose of the first condition is to determine the scope of the efficiencies that are eligible under article
101(3) TFEU. The efficiencies that are eligible under the first condition can be assessed further under the
subsequent conditions of the article. Paragraph 51 of the guidelines on the application of article 101(3)
TFEU sheds light on the assessment of efficiencies under this article. When assessing efficiencies, the
following aspects should be considered: (a) the nature of the claimed efficiencies; (b) the link between the
agreement and the efficiencies; (c) the likelihood and magnitude of each claimed efficiency; and (d) how
and when each claimed efficiency would be achieved. When the forms of horizontal cooperation under the
Compose project are becoming clearer, an assessment of the efficiencies can be made according to these
standards. My focus is on economic efficiencies, my fellow student, Lieke van Daele, will cover other
advantages like sustainability and environmental protection in her thesis. These advantages could also lead
to an exemption under article 101(3) TFEU. When organizing horizontal cooperation between companies it
is important to make a clear assessment of the efficiencies from this agreement. These efficiencies must
fulfil the first condition: they must contribute to improving the production or distribution of goods or
contribute to promoting technical or economic progress. The guidelines make a distinction between cost
and qualitative efficiencies, but these are not exhaustive. This distinction can be used to make the
assessment of efficiencies when the forms and benefits of horizontal cooperation become clearer. In the
following table I provide some of the expected efficiencies of the Compose project according to this
distinction.

Cost efficiencies Qualitative efficiencies
Decrease of logistics costs Improved distribution quality
• Higher load factor of trucks on the roads • Efficient working method
• Balanced network of shippers • Better coordination by ICT solutions
• Joint transportation routes
Maintaining market share by increasing efficient Innovation by knowledge sharing
supply chain
Improved service to consumers
• Improving delivery frequency
• Improving delivery times

37
Second condition of article 101(3) TFEU: fair share for consumers

The second condition imposes a further requirement on the eligible efficiencies determined by the first
condition. These benefits of these conditions need to be received by consumers as well. It is not enough to
justify an infringement of competition law when the benefits of the efficiencies are only present for the
companies that cooperate. The greater the negative effects on competition are, the more important it is
that consumers receive a fair share of the benefits resulting from the agreement. The minimum
requirement is that consumers are at least compensated for any negative impact of the agreement.
However, I would advise to assess the efficiencies of the proposed cooperation agreements and include
how these benefits are translated to the consumers of the products/services. This means that the proposed
horizontal cooperation agreements have objective economic efficiencies, that are broader in scope then
efficiencies just for the parties involved in the agreement. When the companies involved in Compose are
reducing costs, it is more beneficial to reduce variable costs, since consumers are more likely to benefit
form a reduction in variable costs then a reduction in fixed costs.

Third condition of article 101(3) TFEU: indispensability of the restrictions

The third condition implies a proportionality test of the restrictions on competition. This third condition
consists of a two-fold test: the restrictive agreement must be reasonably necessary to achieve the
efficiencies and the individual restrictions of competition in the agreement must also be reasonably
necessary for the attainment of the efficiencies. The first step of the test is to answer the following question:
is the agreement reasonably necessary considering market conditions and business realities facing the
parties? Generally, the assessment of business realities is left to the parties involved and will not be
questioned by the Commission, unless realistic alternatives are available. The second part of the test assess
individual restrictions that might result from the agreement, these individual restrictions need to be
necessary to achieve the efficiencies as well. This proportionality test is important to keep in mind when
setting up horizontal cooperation between companies under the Compose project. When assessing the
efficiencies created under the cooperation it is important to consider the restrictive effects on competition,
and whether these restrictive effects are proportionate given the efficiencies gained.

Fourth condition of article 101(3): no elimination of competition

The fourth condition states that ultimately the competitive process is given priority over short-term
efficiency gains. The restrictive agreement cannot eliminate competition in respect of a substantial part of
the products concerned. For the Compose project this means that no matter what the efficiencies are, there
is a limit to the restriction on competition that can be compensated by efficiencies. In the long run, the
competitive process is more important than efficiency gains. The fourth condition implies an analysis of the
38
different sources of competition in the market, the level of competitive constraint that they impose on
parties of the agreement and the impact of the agreement on this competitive constraint. Both actual and
potential competition is considered. In conclusion, this means that there is still competition left after the
agreement, the agreement cannot eliminate a substantial part of competition.

39
Chapter 6: conclusion & recommendations

My research question at the beginning of this thesis was the following: is cooperation and information
exchange within companies under the Compose project allowed under article 101(1) TFEU and if not are
the economic efficiencies sufficient for the exemption under article 101(3) TFEU? It has become clear that
there is not a single answer to this question. Like most complex legal issues, it depends on the
circumstances. This is especially true in competition law, where almost every analysis is made on a case-
by-case basis, using both economic and legal methods of analysis. Therefore, it is difficult to provide clear
answers and recommendations. However, in this thesis I have strived to be as concrete as possible, with
scarce details available about the types of cooperation under the Compose project. I have provided
recommendations and points of attention that can be used in general when organizing horizontal
cooperation agreements between companies and when applying to the Compose project. It has become
clear that competition law is an important legal obstacle when organizing horizontal cooperation and is
certainly a relevant concern in the Compose project. It is however, not an obstacle that cannot be
overcome and therefore it shouldn’t stand in the way of cooperation. In general, it can be stated that the
Compose project does not have to infringe article 101(1) TFEU, as long as every horizontal cooperation
agreement is carefully examined.

However, acting informed and with care is necessary. It is important to clearly understand the goal of
cooperation and analyse what kind of competitive effects this has on the market. When exchanging
information, it is important to act carefully and to avoid sharing strategic information that might lead to
coordination or a reduction of strategic uncertainty. Important to note is that the burden of proof of
restricting competition under article 101(1) TFEU lies with the competition authority or claimant, and as
we have seen this burden of proof is substantial. If an infringement of article 101(1) TFEU has been
established it is possible to invoke an article 101(3) TFEU defence. This defence can allow an infringement
if the agreement creates certain economic benefits. The burden of proof now lies with the parties
invoking this defence. Four cumulative criteria must be met to invoke the article 101(3) TFEU defence.
Both economic and qualitative efficiencies are eligible under article 101(3) TFEU. Important is that
consumers receive a fair share of the benefits, that the restrictions on competition are indispensable and
that competition is not eliminated for a substantial part in the market. With this thesis, I hope to provide
a complete overview of the system under article 101 TFEU and a solid cornerstone of further research
under the Compose project. In the next section I will add my recommendations for further research by
competition law students.

While this thesis provides a general overview, there are still a lot of questions left unanswered. This is
because the Compose project is still in its initial stages of development, and precise details about the
40
types of horizontal cooperation are scarce. Since competition law is applied on a case-by-case basis, these
details are important. For example, if you look at logistics cooperation, you can share transport routes
and optimize the supply chain or you can share warehouses. These are completely different scenarios that
require individual assessment. Let alone if you expand the cooperation to HR, finance or strategy.

6.1 Legal recommendations for the Compose project

As stated before I believe competition law is not a barrier for the Compose project that cannot be
overcome. It is however, a relevant concern and acting carefully and well informed is important. This thesis
can be used to analyse the different horizontal cooperation agreements. It is impossible to conclude if these
agreements have a restrictive effect on competition without having the details of the cooperation and the
companies involved. Therefore, in addition to the previous chapter, I hereby state my legal
recommendations for the Compose project:

v Individually assess each horizontal form of cooperation and determine the possible risk of
infringing article 101(1) TFEU: each form of horizontal cooperation is different and should be
analysed accordingly.
v Assess information exchange between competitors carefully: advice not to share strategic
information that leads to coordination, foreclosure or reduction of decision-making
independence.
v Reduce the probability of infringing article 101(1) TFEU to a minimum by avoiding restrictions by
‘’object’’ and by carefully analysing restrictions by ‘’effect’’.
v Avoid cooperation agreements with the objective to fix prices, limit or control production or
share markets.
v When assessing agreements between potential competitors with large market shares, act
carefully and seek council of competition law experts.
v Analyse the efficiencies and benefits of horizontal cooperation. In case of infringement of article
101(1) TFEU, these could be used for an exemption under article 101(3) TFEU.
v When developing the matching tool, take competition law considerations into account and aim to
prevent matching direct competitors.

41
6.2 Research recommendations for the Compose project

Besides legal recommendations for the Compose project there is more research to be done in general and
in competition law. Therefore, I provide suggestions of research topics that could be addressed by future
master students:

v Research similar projects organizing horizontal cooperation and share best practices in
competition law.
v Investigate whether a neutral third party governance structure will have positive effects on
competition law concerns. A third party governance structure could govern the types of
cooperation and provide guidance to comply, but it could potentially create entry barriers by
making it easy to detect entrants in the market.
v Investigate if standardization processes occur. Horizontal cooperation agreements could result in
standardization processes. Standardization processes are specifically regulated in the
Commission’s guidelines on horizontal cooperation agreements. Standardization processes
require a separate assessment.

42
List of literature

Books

Whish & Bailey 2015
R. Whish & D. Bailey, ‘Competition Law, 8th edition’, Oxford University Press

Bishop & Walker 2010
S. Bishop & M. Walker, ‘Economics of EC Competition Law, The, 3th edition’, Sweet & Maxwell

Articles

Vranken 2014
J.B.M. Vranken, ‘Handleiding tot beoefening van het Nederlands Burgerlijk Recht, Algemeen Deel’, Deventer

Gerbrandy 2010
A. Gerbrandy, ‘T-Mobile Netherlands v. Raad van bestuur van de Nederlandse Mededingingsautoriteit’,
Common Market Law Review, Volume 47, No 4, 2010, Kluwer Law International

Cruijssen, Cools & Dullaert 2007
F. Cruijssen, M. Cools & W. Dullaert, ‘Horizontal cooperation in logistics: Opportunities and impediments’,
Transpartation Research Part E 43. 2007, Elsevier

Cruijssen, Dullaert & Fleuren 2007
F. Cruijssen, W. Dullaert & H. Fleuren, ‘Horizontal Cooperation in Transport and Logistics: A Literature
Review’, Transportation Journal Vol. 46. No. 3. 2007, Penn State University Press

Nazzini 2006
R. Nazzini, ‘Article 81 EC between time present and time past: a normative critique of ‘’restriction of
competition’’ in EU law’, Common Market Law Review Vol 43 2006, Kluwer Law International

Capobianco 2004
A. Capobianco, ‘Information exchange under EU competition law’, Common Market Law Review Vol 41,
2004, Kluwer Law International

Kandori, Michihiro & Matsushima, 1998
Kandori, Michihiro & Matsushima, ‘Private observation, communication and collusion’, Econometrica, Vol
66, No. 3, Journal of the Econometric Society

Kühn & Vives 1994
K. Kühn & X. Vives, ‘Information Exchanges Among Firms and their Impact on Competition’, Publications of
the European Community, 1994, Luxembourg

Policy documents, guidelines and notices

European Commission Notice
Commission Notice on the definition of relevant market for the purposes of Community competition law
(97/C 372/03)

43
European Commission Notice
Commission Notice on agreements of minor importance which do not appreciably restrict competition
under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) (2014/C
291/01)

European Commission Guidelines
Guidelines on the application of article 81(3) of the Treaty on the Functioning of the European Union
(2204/C 101/08)

European Commission Guidelines
Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to
horizontal co-operation agreements (2011/C 11/01)

Council Regulation No 1/2003
Council regulation no 1/2003 of 16 December 2002 on the implementation of the rules on competition laid
down in Articles 81 and 82 of the Treaty

Cases

Court of Justice of the European Union (CJEU)

CJEU 11 September 2014, C-382/12 (Mastercard / European Commission)

CJEU 11 July 2013, C-439/11 (Ziegler SA / European Commission)

CJEU 13 December 2012, C-226/11 (Expedia / Autorité de la concurrence)

CJEU 13 October 2011, C-439/09 (Pierre Fabre)

CJEU 4 June 2009, C-8/08 (T-Mobile / Nederlandse Mededingingsautoriteit)

CJEU 20 November 2008, C-209/07 (Competition Authority v. Beef Industry Development Society Ltd)

CJEU 23 November 2006, C-238/05 (Asnef-Equifax / Ausbanc)

CJEU 19 February 2002, C-309/99 (Wouters / Nederlandse Orde van Advocaten)

CJEU 12 September 2000, C-180/98 (Pavlov)

CJEU 23 April 1991, C-41/90 (Höfner v Macrotron GmbH)

CJEU 28 February 1991, C-234/89 (Delimitis / Henniger Bräu AG)

CJEU 9 July 1969, C 5/69 (Völk v. Vervaecke)

General Court (EGC)

EGC 14 April 2011, T-461/07 (Visa Europe Ltd v. European Commission)

EGC 2 May 2006, T-328/03 (02 Germany GmbH v. European Commission)

EGC 15 September 1998, T-374/94 (European Night Services)

EGC 18 September 2001, T-112/99 (Métropole télévision / European Commission)
44

EGC 26 October 2000, T-41/96 (Bayer AG v. Commission)

Commission decisions

EEC 17 February 1992, 92/157 (UK Agricultural Tractor Registration Exchange) (Commission decision)

45

46

Art 101 TFEU and Horizontal Cooperation in EU

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Art 101 TFEU and Horizontal Cooperation in EU

Uploaded by

Copyright:

Available Formats

ARTICLE

101 TFEU &

2.2.2 Horizontal cooperation within logistics

2.4 Final thoughts on the economics of competition law

3.1 An introduction to the legal framework of article 101(1) TFEU

3.3 Guidelines on the application of article 101 TFEU to horizontal cooperation

3.5 Test of article 101(1) TFEU

3.6 European Night Services, Metropole Television v. Commission & Wouters

3.7 Information exchange under 101(1) TFEU

3.7.2 Information exchange: assessment under article 101(1) TFEU

3.7.3 Information Exchange: points of attention

Strategic information includes: prices, quantities, customer

Strategic information includes: capacities, qualities, marketing

IE can reduce decision-making independence by reducing

Historical information is less likely to infringe article 101(1)

Infringement of article 101(1) TFEU is more likely if

Companies are more likely to achieve a collusive outcome

Exchange of public information is not likely to infringe article

Exchange of aggregated data is less likely to infringe article

Disclosure of information can also constitute to aconcerted

Horizontal cooperation is beneficial for parties but could

Restriction by object? Infringement of article 101(1) TFEU

Restriction by effect analysis: market definition,

4.2 Guidelines on the application of article 101(3) TFEU

4.2.1 Different views on article 101(3) TFEU

4.2.2 First condition of article 101(3) TFEU: Efficiency gains

4.2.5 Fourth condition of article 101(3) TFEU: No elimination of competition

4.3 Block exemptions under article 101(3) TFEU

4.4 Conclusion on article 101(3) TFEU

Agreement must contribute to improving production or

Restrictions must be indispensable to the attainment of

Agreement must not eliminate competition in a

5.2 Article 101(1) TFEU and Compose

Article 101(1) TFEU

Article 101(1) burden Assess agreements

Competitive In some cases, pro-

You might also like