Trade associations, industry organizations and conferences provide a platform for representatives from the same industry to meet and discuss common issues. However, such platforms could pose a risk from a competition perspective at times as they could turn into a forum for competitors to discuss and share commercially sensitive information and/or reach agreements relating to fixing prices, quantity and so on, which are prohibited under Indian competition law.
The precedents of the Competition Commission of India (CCI) on the expected conduct of trade associations have been discussed previously in this column. In this issue, we briefly examine some risks associated with such platforms and provide guidance on the expected conduct from corporate representatives attending such events.
Functions and forbidden acts
As discussed previously, the CCI has observed that a trade association carries out many valuable and lawful functions which provide public benefit such as: (a) setting common technical standards for products or interfaces; (b) arranging education and training for potential entrants in the industry; (c) paying for, and encouraging, research into new techniques; and (d) developing a common response to changing government policy.
The formation, membership and participation in the collective activities of a trade association does not by itself amount to violation of competition law. However, when trade associations are used as a platform to aid illegitimate objectives contrary to the Competition Act, 2002, such as: (a) taking collective decisions which are anti-competitive; (b) issuing anti-competitive circulars/diktats to the members; (c) facilitating collusive or collective decision-making with the intention of limiting or controlling the production, distribution, sale or price of or trade in goods or services, by its members, then it is in violation of the provisions of the Competition Act.
Risks and guidance
It is pertinent to point out that even a passive attendee, i.e. a person who does not actively participate in the discussions but is present while such discussions are going on, may be held liable for a violation of competition law. Social events and gatherings around trade association events, and meetings or meals with competitors, could easily turn into discussions which are anti-competitive.
It is suggested that an invitation to such events be accepted only if the event has a clear (lawful) purpose and a record must be kept of the participation in, and conversations at, such events. The agenda of the meetings must be vetted by the attendee’s legal department and any departure from the agenda must be opposed. The attendee should refuse to participate in any anti-competitive discussions, and if after such opposition the discussion does not stop, the attendee should leave and make sure their departure is recorded and noted (in the minutes, if any). Afterwards, the attendee should immediately inform their legal department or their supervisor in writing.
Before sharing any information with a competitor, it is important to do a self-assessment as to why such information is being shared (i.e. the lawful purpose of sharing the information), with whom the information is being shared, whether the information is commercially sensitive, whether the information could affect a competitor’s market behaviour, and whether such sharing looks and feels right.
Only historical and general information may be shared with the competitor or the trade association with prior approval of the attendee’s legal department. Generally, historical information is that which no longer has any direct commercial value. As a rule of thumb, it is information which is at least two years old and not forward-looking. General information relates to overall market trends, global demand and global offer, or statistics.
Similar rules apply while sharing information with trade associations. Industry or trade associations may induce sharing of commercially sensitive information for the purposes of compiling statistics and preparing reports. Such reports may be used to track output and price changes in the industry and competitors may increase or decrease their price or output in response to the movements by the players. An example of this was the Cement Manufacturers’ Association case, in which the CCI held that the association was used as a platform to collect retail and wholesale prices, and the association in turn disseminated information about actual production and available capacities of competing cement companies.
Competition law is not an impediment to appropriate trade association or industry activities. The attendees or members at such events must be aware of the broad ambit of the Competition Act and should ensure that they do not participate in any illegal discussions. This is also important since participation in such discussions could result in financial penalties on the individual attendees (in addition to the company).
Amit Tambe is a partner at Trilegal and Gautam Chawla is a senior associate. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.
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