Irish Competition Authority Decisions

1. Notification was made on 15 September 1998 by the Animal & Plant Health Association Ltd. (APHA) of an exchange of information agreement with a request for a certificate under Section 4(4) of the Competition Act, 1991.

2. The notification concerns an agreement between APHA and companies involved in the sale of veterinary products in the State. The parties have agreed that Apha will collect information relating to product sales from the companies and disseminate the results among them. This is done by means of a survey, the contents of which APHA now intends to update.

3. APHA is the representative body for manufacturers and sole distributors of animal health (veterinary medicines) and plant health (plant protection/agrochemical) products in Ireland. APHA was formed in July 1994. It represents 21 companies and is financed by its membership. Its functions include making representations to relevant Government Departments and the European Union on an ongoing basis, advising its members on legislative developments and providing other services to its member companies.

4. The other parties to the arrangement are wholesalers and other companies who sell animal health products directly to retailers who have agreed to take part in the survey.

5. The subject matter of the survey concerns the Irish animal health market. According to APHA, it is valued at about £70m annually. The industry is dominated by products used in the control of internal parasites. Approximately 80% of animal health product business is sold through wholesalers. The remaining 20% is sold directly by companies to the retail outlets which include veterinary surgeons, pharmacists, co-ops and merchants.

6. APHA have agreed with 17 firms to conduct and distribute a survey of sales of animal health products in the State. The 17 firms will provide APHA with information on their sales in the State. These firms account for approximately 80% of the sales of animal health products in the State. APHA will assemble information from the companies but also from wholesalers. Where the company supplies a wholesaler, the data will be provided by the wholesaler. Where the company supplies the market directly, the data will be provided by the company.

7. Information collected from the firms by APHA for purposes of the survey is limited to the product sold, amount sold, and the identity and category of the purchaser. In order to derive monetary amounts for product sales, APHA will match products and amounts sold against published price lists of the relevant companies. The published price lists are not confidential and are freely available in the trade. Therefore, the monetary amounts of sales as collected by APHA are reconstructed figures and not actual sales figures. Since discounts are frequently given in the trade off published price lists, APHA estimates that their reconstructed figures will somewhat overstate actual sales, by an amount in the order of 10 - 15%. APHA will not collect any information from client firms as to actual prices charged, either in particular transactions or on an aggregate basis.

8. For purposes of the survey, APHA intend to aggregate the information collected across product lines (thereby including multiple brands within a product line) by type of customer. Therefore, the survey results will give breakdowns for amounts of products sold across brands by type of retail outlet (veterinary surgeons, pharmacists, co-ops and merchants). The information will be provided on a quarterly basis and it is expected that the survey will be completed and circulated within 45 days of the end of each quarter. APHA intend to break the information down into sales by regions.

9. The information in the survey is aggregated as to both seller and purchaser. Each element of information disseminated in the survey will be comprised of aggregated information as to multiple sellers and buyers. Therefore the survey will not reveal any individual transactions in the market. In addition, no information is either collected or circulated as to actual prices charged in the market.

10. The notifying party submitted that the type of survey information and its presentation would not be in breach of competition legislation.

11. Section 4(1) of the Competition Act, 1991 states that “all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention restriction or distortion of competition in trade in goods or services in the State or in any part of the State are prohibited and void.”

12. Section 3(1) of the Competition Act, 1991 defines an undertaking as “a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.” APHA is a representative body of 21 firms active in the animal and plant health industry and is therefore an association of undertakings within the meaning of the Act. APHA is also an undertaking itself as it is engaged for gain in the supply of services to its members. In particular, it represents its members in matters concerning the development of domestic and EU legislation, and it promotes the interests of the animal and plant health industry in Ireland. The other parties to the agreement are firms that sell animal health products in the State. The agreement is an agreement between undertakings. The agreement has effect within the State.

13. The European Commission has considerable experience dealing with information exchanges under competition rules. In its 1968 "Notice on Co-operation Agreements" the Commission noted that

"Agreements whose sole purpose is the joint procurement of information which the various enterprises need to determine their future market behaviour freely and independently, or the use by each of the enterprises of a joint advisory body, do not have as their object or result the restriction of competition. But if the scope of action of the enterprises is limited or if the market behaviour is co-ordinated either expressly or through concerted practices, there may be restraint of competition. This is in particular the case where concrete recommendations are made or where conclusions are given such a form that they induce at least some of the participating enterprises to behave in an identical manner on the market."

14. Therefore, exchanges of information relating to prices charged by individual firms can be characterised as facilitating collusion and therefore is expressly prohibited under European competition rules (See IFTRA Glass Containers (1974)). Information exchanges as to output and sales is not as easily characterised and the rule is often articulated that there "is no objection to the collection by a trade association of statistical information giving an aggregate picture of the output and sales of the relevant industry without identifying individual undertakings." Bellamy & Child, Common Market Law of Competition (4th Edition), Section 4-034. However, this rule can not be taken as a safe harbour for all types of information exchanges which do not included information relating to prices. In United Kingdom Agricultural Tractor Registration Exchange (1992) the Court of First Instance found that information exchanges in an oligopolistic market may impair competition where the information pinpointed the location of certain products sold, in this case, agricultural vehicles. Therefore, even as regards information exchanges which do not involve price information, in some circumstances, they may be prohibited under competition rules.

15. The Authority recognises that information exchanges can enhance competition by providing firms with valuable information for management purposes. However, such information exchanges must be scrutinised to ensure that they do not facilitate collusion among independent firms. Here, the Authority is satisfied that the agreement to collect and disseminate information does not restrict competition in the animal health products market. In particular, the Authority notes two characteristics of the proposed scheme. First, no information is collected or circulated as to prices actually charged in the market. Price information, needed to reconstruct information in a useful form, is taken entirely from non-confidential, publicly available sources. Second, the Authority notes that the information to be disseminated will be aggregated in a form so that it is not possible to identify individual transactions. This is a result of the large number of buyers and sellers active in this market. Due to both of these factors, the Authority is of the view that the arrangements do not contravene Section 4(1) of the Competition Act.

16. Should the arrangements be altered so that either determining characteristic outlined in paragraph 15 is no longer present, the arrangement would not benefit from this certificate. This would be the case if APHA utilised actual price information in the preparation of the survey. In addition, the Authority notes that should the survey seek to provide a geographic breakdown of the data into regions sufficiently small so that transactions between individual buyers and sellers could be identified, then in the Authority’s opinion the arrangements may have an anti-competitive effect.

17. In the Authority’s opinion APHA and the firms who are parties to the arrangement are undertakings within the meaning of Section 3(1) of the Competition Act, 1991, as amended, and the notified agreement is an agreement between undertakings. In the Authority’s opinion, the notified agreement does not prevent, restrict or distort competition and thus does not contravene Section 4(1) of the Competition Act.

The Competition Authority has issued the following certificate:

The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, the agreement between Animal & Plant Health Association Limited and the other firms relating to an exchange of information agreement in the animal health products market notified under Section 7 of the Competition Act, 1991 on 15 September 1998 (Notification No. CA/10/98) does not contravene Section 4(1) of the Competition Act, 1991, as amended.

For the Competition Authority,