Purchasing cooperatives and antitrust law
31 Jan 2019
Purchasing cooperatives provide value to many retailers and traders. However, with these kinds of associations it is necessary to ensure that they do not violate antitrust or competition law.
Purchasing cooperatives can be particularly beneficial for small and medium-sized merchants looking to strengthen their position in the market. While purchasing cooperatives of this kind are allowed under EU law, their market share cannot be too large. We at the commercial law firm GRP Rainer Rechtsanwälte note that a market share of around 15 percent serves as a benchmark here.
It is in view of this that the Bundeskartellamt, Germany’s Federal Cartel Office, has initiated administrative proceedings against a purchasing cooperative for furniture. The cooperative already counts several commercial enterprises as its members, with another group wishing to join in the coming year. The Bundeskartellamt is now assessing whether there are concerns pertaining to competition law that preclude the group being admitted.
Antitrust law does not, as a general rule, preclude purchasing cooperatives of this kind, as these associations enable small and medium-sized businesses to maintain and strengthen their position in the market and, of course, also provide consumers with goods on more favorable terms. But there are limits: these kinds of cooperatives can put pressure on manufacturers. If their influence on the market becomes too great, this can have negative consequences. Manufacturers that cannot meet the negotiated terms could be pushed out of the market, reducing supply and ultimately subjecting consumers to rising prices.
That is why EU antitrust legislation provides that these kinds of purchasing cooperatives should not obtain a market share greater than approx. 15 percent. The Bundeskartellamt will now examine the purchasing cooperatives in the furniture sector from a number of different angles to determine whether there are concerns pertaining to antitrust law that preclude the association’s expansion.
Violations of antirust or competition law can be met with severe penalties, including formal written warnings, injunction suits and damages claims. Yet violations are by no means always obvious; even individual clauses within contracts can violate provisions of antitrust law. Lawyers who are experienced in the fields of antitrust and competition law can offer advice.