Competition Law Directions

Introduction

The Federation of European Manufacturers of Friction Materials (FEMFM) represents about 20 member companies. Its purpose is to protect and promote the general, ideal and business interests of the friction materials industry. The objectives of FEMFM are to promote technical cooperation between friction material manufacturers on a national and international level as well as to ensure active and passive vehicle safety by establishing safety criteria, quality standards and sustainability at the highest technical level. In doing so, FEMFM is generally committed to acting lawfully and strictly orientate its association work towards compatibility with German and EU competition law. 

The FEMFM is committed to a practice that conforms to the law and organizes its work in strict compliance with German and European competition law. These directions contain competition law information for FEMFM committees, members and employees. In the interest of the FEMFM and its members, the observance of these instructions shall ensure that possible infringements of competition law are avoided in all association activities.

These directives are intended to provide clarity and a reliable point of reference for the members and staff of the FEMFM. They include, among other things, regulations on permissible and impermissible topics at association meetings, on market information systems, on association recommendations and on the conduct of association meetings. These guidelines are binding for all participants in the FEMFM association and serve to protect the association and its members.

1. Preliminary Remark on the General Ban on Agreements and Concerted Practices

Competition law is designed to combat all forms of restrictive practices by competing companies. In Germany, anti-competitive practices are prohibited under section 1 of the Act against Restraints of Competition (Competition Act - GWB). 

The GWB prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which aim at or lead to the prevention, restriction or distortion of competition.

The European prohibition of restrictive practices applies if the practices referred to in Section 1 GWB are liable to affect trade between member states (Article 101 (1) of the Treaty on the Functioning of the European Union (TFEU)) and have as their object or effect the prevention, restriction or distortion of competition within the internal market.

Competition law prohibits, among other things, agreements between companies that fix prices, terms and conditions of business, etc.; agreements in this sense are not limited to explicit, in particular written statements. An agreement may also be implied by the actions of the parties. However, competition law prohibits not only agreements but also concerted actions by companies that lead to similar results. 

Competition law is a broad and complex area that cannot be fully dealt with and covered by these directions. A more comprehensive legal assessment is usually required for more detailed inquiries.

2. Topics and Organization of Association Meetings

Although association meetings are primarily used to discuss political issues, competition law is fully applicable to the association's work. Certain topics can be critical from a competition law perspective if they concern data relevant to competition. Competition relevance is given if the mutual exchange of relevant information, its unilateral disclosure or discussions among the association members on this subject reduces or removes uncertainty about the current or future market behavior of competitors and thus violates the so-called (protected) secret competition (e.g. in tender procedures). The following overview of permissible or impermissible topics applies not only to the actual association meeting, but also to breaks, supporting events and the associated correspondence.


(a) Permissible Topics for Meetings of the Association

At association meetings, companies can generally exchange information on the topics discussed at the meeting. This includes: 

  • Current legislative projects and their consequences for all member companies;
  • Political environment, general technical/scientific developments, regulatory measures of general interest;
  • Current economic developments and general economic data and general developments in the industry (if publicly available);
  • In most cases, information on the business forecast for the company as a whole, for the entire product portfolio or for other business segment groups, which does not provide any indication of the market position and developments of individual products;
  • Discussions about FEMFM lobbying activities;
  • Benchmarking activities, if data is freely available on the market and does not refer to individual products or market behavior of association companies; 
  • Company-related benchmarking activities, if (as a rule) at least five companies are involved; a neutral third party carries out the benchmark and returns the result to the participants in anonymized and aggregated form; no re-individualization is possible within the framework of the association meeting; no reference to individual products or market behavior exists (only e.g. to internal processes or environmental standards);
  • General industry analysis;
  • The general exchange of freely accessible information and data (e.g. from the KBA, from the Internet or from already published annual reports of the member companies);
  • Preparation of an industry overview (if the aggregation of data of the individual member companies is done via FEMFM or another neutral third party).

 

(b) Impermissible Topics of an Association Meeting

At association meetings, companies are not allowed to exchange information on matters that violate antitrust or undisclosed competition rules (e.g. in tender procedures) or concern internal company information, data and business secrets. These include, but are not limited to:

  • Information or agreements on prices, price components, rebates, pricing strategies or price calculations or planned price changes; 
  • Terms of delivery or payment for contracts with third parties;
  • Information about business strategies or market behavior ("Signaling");
  • Information about profits, profit margins, market shares or planned investments that is not publicly available, even if it does not allow conclusions to be drawn about the market position of individual products;
  • Information about internal and non-public research and development projects;
  • Information that enables coordination vis-à-vis the opposite side of the market (customers, suppliers, competitors not organized in the association), especially in connection with offers to third parties (e.g. is there any participation in tendering at all, for which lots, strength of interest in winning the tender);
  • Sharing of markets or sources of supply in terms of space and personnel, as well as express or tacit agreement on boycotts and supply or procurement blocks against certain companies;
  • Concrete demands from customers or suppliers, including the company's own reaction to these demands or the reaction of competitors;
  • Verification of information received from customers or suppliers;
  • Joint discussion and analysis of statistics permitted under section 3, in particular no dissolution of aggregation.

 

(c) Preparation and Conduct of Meetings of the Association

In consultation with the chairperson of the meeting, the staff of the FEMFM will send out official invitations to all meetings in good time. The invitation shall be accompanied by an agenda as detailed as possible. The FEMFM staff will assist the chairperson of the meeting to ensure that the agenda and other documents for the meeting are formulated clearly and comprehensibly and do not raise any competition concerns. In case of doubt, the FEMFM management will provide clarification or make changes. At least one FEMFM staff member should be present at each FEMFM association meeting to assist the chairperson of the meeting. The chair of the meeting shall ensure that the meeting is conducted according to the appropriate procedures (agenda and minutes).

At the beginning of the meeting, the chair of the meeting shall draw the attention of the participants to the compliance with competition law. In the case of regular meetings with the same participants, this should be done at appropriate intervals and not at every meeting. The chairperson of the meeting intervenes in proceedings and discussions in order to prevent violations of competition law.

If the participants wish to deviate from the agenda, the chairperson of the meeting will conduct a formal vote on the change and record the decision. 

The participants of a meeting should object to new items on the agenda which they consider incompatible with competition law or which were not adopted in a formal resolution. They should request that the deviation from the agenda and their objections shall be recorded in the minutes. The chair of the meeting shall consider the objections and, if appropriate, reject the items concerned.

 

(d) Minutes of Association Meetings

The FEMFM staff shall assist the chairperson of the meeting in ensuring that correct and complete minutes of association meetings, including the decisions taken there, are drawn up. Meeting participants should object, if they notice that no minutes have been taken.

The FEMFM staff will work to ensure that the wording of the minutes is clear and unambiguous. The minutes of association meetings are sent to all participants in a timely manner.

The meeting participants check the minutes upon receipt to ensure that they correctly reflect the essential course of the meeting and its resolutions. They immediately inform the FEMFM of any incomplete or incorrect minutes, especially on issues relevant to competition law, and request that this shall be corrected.

 

(e) Behavior in Association Meetings

With the support of the FEMFM staff member, the chairperson of the meeting ensures that there are no inadmissible decisions, agreements, discussions, spontaneous statements or an impermissible exchange or disclosure of information on topics relevant to competition law at the association meeting. The chairperson of the meeting shall immediately point out to meeting participants that they do not act in conformity with competition law and should prevent further statements by one or more meeting members, which are questionable under competition law. A continuing violation or infringement should be recorded in the minutes. The chairperson of the meeting should break off or adjourn the discussion or, if necessary, the entire meeting if legal clarification appears necessary. 

The meeting participants should themselves demand that a discussion or meeting be broken off or adjourned, if they have doubts about its legality. This demand must be recorded in the minutes. Meeting participants should leave the meeting if a discussion that is questionable in terms of competition law continues. The leaving of a meeting participant must be recorded with name and time.

3. Market Information Procedure / Association Statistics

Market information procedures are organized data collections that provide information, for example in the form of association statistics, e.g. on vehicle registrations. Such market information procedures and other statistics are only permissible, if they serve a legitimate purpose (e.g. the analysis of industry trends) and are officially managed by the association or another neutral body, which only publishes anonymized and non-identifiable aggregated overall data. The FEMFM ensures that its market information procedures comply with the legal requirements, in particular (also with regard to the respective market structure and reporting frequency) do not lead to an artificially increased market transparency and (as a rule) that at least five companies per reporting category are included. In the context of market information procedures, company-related data may only be transmitted by the respective companies to the FEMFM in the designated procedures, but not in association meetings.

4. Position Papers and Press Releases of the FEMFM

The FEMFM ensures that its position papers and press releases do not contain any formulations that intentionally or unintentionally indicate agreements, uniform behavior or corresponding recommendations of the FEMFM. Permissible are formulations that objectively reflect the market situation and market development and represent all reasonably reaction possibilities without unilaterally favoring a certain reaction possibility.

5. Association Recommendations

The FEMFM works out association recommendations in special expert committees, including technical norms and standards (e.g. within the framework of DIN). The FEMFM examines the legal framework of its recommendations. The conditions, norms and standards are developed in an open, transparent and non-discriminatory procedure. The FEMFM makes these recommendations available to its member companies for voluntary application without obligation. The FEMFM explicitly does not issue any recommendations, neither directly nor indirectly, for a certain market behavior of its member companies.

6. Self-Commitment Declarations

The FEMFM may develop self-commitment declarations of the member companies in certain areas, provided

  • this serves the achievement of a goal to be recognized (e.g. in environmental and consumer protection),
  • the consumers have a substantial share in the profits to be expected from it,
  • the voluntary declaration of commitment is the economically most favorable way to achieve the objective,
  • the declaration is open to third parties,
  • the freedom of action of the parties involved is not unreasonably restricted,
  • the market access of potential competitors is not impeded; and
  • no noticeable restriction of competition through concerted practice is affected.

7. Admission and Rejection of New Members

The FEMFM is basically free in its decision about new members. The FEMFM has detailed the requirements for membership in its statutes. The FEMFM will respect an existing competition law right of admission of a company that wants to become a member of the FEMFM. The FEMFM may refuse admission to the FEMFM to companies that do not fulfill the admission criteria according to the statutes. However, the refusal of admission may not violate the principle of equal treatment by admitting another, comparable company despite not meeting the admission criteria.

8. Further Information / Legal Advice

The FEMFM is available to all employees and members of the FEMFM committees for questions regarding these instructions. Legal advice should also be sought in all cases of doubt as to the admissibility of a course of action or issue that arise before or during an association meeting. In any case, the FEMFM must be informed immediately of any observed or suspected violations.

 

FEMFM, 1 March 2020, corrected version