Market sharing by sub-suppliers triggers a fine

Background: Market-sharing agreement

In November 2016, Sydkystens Automatik signed a cooperation agreement with Findan El-anlæg, which – like Sydkystens Automatik – provided services to customers in the Zealand region as a sub-supplier in connection with installations of refrigerating plants in convenience stores. According to the evidence given in the case, the two businesses were the only ones having the required knowledge and capacity to perform that kind of work.

The purpose of the cooperation agreement was to enable Sydkystens Automatik and Findan El-anlæg to work for each other in situations where either of them was short of manpower and the other was short of assignments. 

As part of the agreement, each party accepted an obligation not to carry out work or accept assignments directly for the other party's (named) customers. Doing that would trigger a fine of DKK 200,000. 

The contents of the agreement were based on a similar agreement that Sydkystens Automatik had previously signed with a third business after having obtained advice from a lawyer.

The cooperation agreement between Sydkystens Automatik and Findan El-anlæg was terminated in February 2017.

Judgment

The Court concluded that the two businesses were active in the same market, and found that it must have been obvious to the senior employee - and thus to Sydkystens Automatik – that the agreement would split the market and potentially restrict competition. 

According to the Court, it was of no importance that Sydkystens Automatik had previously obtained legal assistance in drawing up the wording of the agreement. The wording had namely been prepared in another context and for an agreement with another business that was not active in the same market. In addition, the Court referred to the fact that Sydkystens Automatik had not obtained additional advice when entering into the agreement with Findan El-anlæg. 

Accordingly, the judgment is in line with the case law of the European Court of Justice, according to which a business violating the competition rules cannot avoid being given a fine solely because the business has followed advice provided by a lawyer.

Read an example of that practice: Judgment of the Court in Case C-681/11, Schenker & Co. and others.

Determining the fine

As usual, the fine imposed on Sydkystens Automatik was determined on the basis of an overall assessment of the gravity and duration of the violation and the revenue of the business. In this connection, the Court had particular regard to the following:

• the duration of the agreement was limited;
• anti-competitive agreements on market sharing between competitors are a serious violation of the Danish Competition Act;
• the agreement imposed on each party a financial penalty for violation of the prohibition against accepting assignments from the other party's customers.
   

This case emphasizes how important it is for businesses to seek competition law advice before entering into cooperation agreements, particularly if the cooperation partner may be regarded as a (potential) competitor. 

Sydkystens Automatik and the senior employee have appealed the judgment. A similar case against Findan El-anlæg has not yet been finalised.

Read the press release issued by the Danish Competition and Consumer Authority (in Danish).