Regarding the **provision of services by RAs to suppliers**, it is unclear to what extent this may be considered a separate market.

When discussing relevant markets in the context of the operation of RAs, the assessment by competition authorities might be highly complex. Upstream, RAs concern the purchase of hundreds of thousands of goods in many different markets; downstream, on markets for final sales to consumers, there are even more markets due to the local nature of the markets (Chauve, 2019). This complexity also means that it is difficult to make a precise estimate of all the consequences of a given conduct (Chauve, 2019).

In the next section, the assessment of RAs under the relevant law is discussed in more detail, starting with an assessment under competition law (Articles 101 and 102 TFEU), Directive (EU) 2019/633 and national laws. The sections build on the applicable legal doctrine and soft law, as well as the descriptions and examples provided by the workshop participants.

## 4.2 Article 101 TFEU: agreements by undertakings and decisions of associations of undertakings

Article 101 TFEU prohibits agreements, decisions and concerted practices of undertakings which have as their object or effect the restriction of competition. The doctrine of Article 101 TFEU distinguishes between practices which are restrictive to competition by 'object' and others which are restrictive 'by effect'.

Restrictions by object are assumed to have a detrimental effect on competition. Therefore, in order to demonstrate breach of Article 101 (1), an authority (or plaintiff) need not prove the effect. By contrast, if it cannot be determined that a restriction is 'by object', an authority (or plaintiff) needs to demonstrate that the restriction has an anticompetitive effect. This distinction 'by object' and 'by effect' is relevant for both horizontal and vertical restraints assessed under Article 101 TFEU. This is an important distinction because it implies a different level of scrutiny and evidentiary burden. However, it should be noted that all restrictions, regardless of whether they are by object or by effect, can benefit from the exemption under Article 101 (3) TFEU provided that they meet the four cumulative criteria set therein: namely the need to generate benefits such as improving production or distribution; passing a fair share of the benefits to consumers; making sure the restrictions imposed do not go beyond what is necessary to achieve the benefits and that they do not eliminate competition for a substantial part of the products or services concerned. This assessment is discussed separately in section 4.2.3.

Which restrictions are by object? There is no exhaustive list; however, practices such as price-fixing, market allocation, and exchanges of sensitive information have been considered restrictions by object.<fnref n="95" /> It should be noted that these practices may affect both downstream and upstream markets, thereby inflicting harm on suppliers or consumers. The guiding principle is that these are restrictions whose anticompetitive nature should be obvious once a preliminary examination of the nature of the restraint in its legal and economic context is carried out. In the words of the Court 'in order to determine whether an agreement between undertakings or a decision by an association of undertakings reveals a sufficient degree of harm to competition that it may be considered a restriction of competition 'by object' within the meaning of Article 81(1) EC,<fnref n="96" /> regard must be had to the content of its provisions, its objectives and the economic and legal context of which it forms a part. When determining that context, it is also necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question.'<fnref n="97" /> If, upon such an examination, a

<footnote n="95">⁹⁵ Indications of which restrictions are considered by object can be found in Commission guidelines, block exemptions and communications. For a recent overview, see European Commission, Commission Staff Working Document, Guidance on restrictions of competition "by object" for the purpose of defining which agreements may benefit from the De Minimis Notice SWD(2014) 198 final (Revised Version of 03/06/2015).</footnote>

<footnote n="96">⁹⁶ Currently, this is Article 101 TFEU.</footnote>

<footnote n="97">⁹⁷ Case C-67/13 P Groupement des cartes bancaires (CB) ECLI:EU:C:2014:2204, paragraph 53.</footnote>
restriction is not obviously anticompetitive, a further analysis of the possible
anticompetitive effects is necessary.

It should be noted that the prohibition in Article 101 TFEU applies not only to horizontal agreements (that is, agreements between undertakings active on the same level in the supply chain) but also to vertical agreements (that is, agreements between undertakings active on different levels in the supply chain). For horizontal agreements, the Horizontal Cooperation Guidelines distinguishes between actual or potential competitors, while clarifying that it applies also to non-competitors<fnref n="98" />. When purchasers are not active on the same relevant selling market (the case of non-competitors), the Guidelines note that horizontal agreements are unlikely to have restrictive effects. However, this is not the case where the parties 'have a position in the purchasing market that is likely to be used to harm the competitive position of other players in their respective selling markets (HG, 212). The notion of 'other players' is not entirely clear in the Guidelines as it could refer to the position of rival retailers or possibly suppliers or other undertakings. As a matter of doctrine, however, this distinction is not relevant. The prohibition in Article 101 (1) TFEU applies to all undertakings who are party to an agreement in restriction of competition, regardless of whether they are actual or potential competitors on a given market.<fnref n="99" />

Insofar as horizontal aspects of RA conduct are concerned, the primary source of guidance are the Horizontal Cooperation Guidelines (i.e. the European Commission's Communication providing guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements). Insofar as vertical relations are concerned, e.g. between RA members and suppliers, the relevant block exemption regulation on vertical restraints<fnref n="100" /> and the corresponding guidelines<fnref n="101" /> would be applicable. The latter instruments were not discussed at the workshop so they are also not reflected further in this report.

The Horizontal Cooperation Guidelines do not focus on RAs as such; the guidance is meant broadly for joint purchasing collaborations. The scope of configurations falling in the category of 'joint purchasing' is broad. For instance, the Guidelines cover purchasing carried out by a jointly controlled company, by a company in which other companies hold non-controlling stakes, and purchasing in the context of a contractual arrangement or even looser forms of co-operation (HG, 194).

The Horizontal Cooperation Guidelines recognise that joint purchasing may produce substantial efficiencies, and that certain configurations (e.g. members having a low joint market share, or not being competitors on the downstream market) are less likely to lead to anti-competitive effects, as discussed in more detail in the analysis of the restrictions 'by effects'. Moreover, Article 101 (3) TFEU takes into account the potential positive effects that may result from joint purchasing agreements, and foresees an exemption under a combination of specific conditions, described in detail below.

## Restrictions 'by object'

The Horizontal Cooperation Guidelines note that while joint purchasing arrangements may lead to important efficiencies, they might also lead to a collusive outcome<fnref n="102" /> if they facilitate the coordination of the parties' behaviour on the selling market (HG, 213).

<footnote n="98">⁹⁸According to the Horizontal Cooperation Guidelines, actual competitors are those active on the same relevant market. Potential competitors are those which are likely, within a short period of time, to enter another's relevant market (HG, 10). The guidelines also cover cooperation agreements between non-competitors, e.g. two companies active in the same product market, but in different geographic markets without being potential competitors (HG, 1).</footnote>

<footnote n="99">⁹⁹Case C-194/14 P AC-Treuhand AG v European Commission [2015] ECLI:EU:C:2015:717, paragraphs 33-36.</footnote>

<footnote n="100">¹⁰⁰ Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices OJ L 102/1.</footnote>

<footnote n="101">¹⁰¹ Commission Notice, Guidelines on Vertical Restraints OJ C 130/1.</footnote>

<footnote n="102">¹⁰² Collusion broadly refers to secretive anticompetitive agreements made by market participants. However, there need not be an explicit agreement in order to reach a collusive outcome. The collusive outcome can be the result of tacit coordination – a situation in which the mere following of market signals, without any agreement, may result in an outcome identical to the outcome which would have arisen in the case of an actual collusive agreement.</footnote>
Experts from authorities expressed concern that RAs may be explicitly used as a vehicle for exchanges of sensitive information and coordination of behaviour among competing undertakings with the goal of restricting competition (Chauve, 2019; Clementi, 2019). According to the case law of the Court of Justice of the European Union, agreements involving the fixing of purchasing prices (be it directly or indirectly) can be considered restrictions by object.<fnref n="103" /> Under the Horizontal Guidelines, the approach is that agreements on purchasing prices are to be considered as a restriction by effect when these prices are agreed in the context of a joint purchasing arrangement (HG, 206). There may be instances, however, where alliances are a disguise for collusion going beyond the procurement of products itself - for instance, with respect to the development of shops or aligning the prices to the final consumers on retail markets (Bauer, 2019; Chauve, 2019), which are considered to restrict competition 'by object' (HG, 205).

A concern mentioned by workshop participants was the frequent shifting of members between different alliances - over the past years (see section 2.6 on the evolution and dynamics of RAs)- in the words of the Italian Antitrust Authority, 'alliance waltzes' (Clementi, 2019), which might increase transparency among the industry members, and possibly also among the alliances themselves. Even if members within European alliances are not direct competitors in local markets, information may indirectly be obtained through rotating memberships and employee rotation, resulting in information being shared among a larger number of retail chains and alliances, including direct competitors active in other (e.g. formerly overlapping) alliances (Chauve, 2019; Dobson, 2019). On the other hand, retail representatives emphasised that European RAs have governance and strong compliance rules put in place to ensure compliance with national and EU competition rules. They enforce strict compliance programs specifically in order to limit the flow of sensitive information (Bouchut, 2019). This is something that authorities are vigilant about, as evidenced by the Commission's investigation into the activities of Casino and Intermarché (see Box 4 below).

The following sections discuss some restrictions of object, which may arise in the context of alliances – for example, market allocation, output restrictions, exchanges of information, and price collusion. As explained above, these practices may inflect harm upstream to suppliers or downstream to consumers. It is not to be assumed that these restrictions are a general feature of RAs. However, these are theories of anticompetitive harm mentioned by experts and authorities as relevant when scrutinising the behaviour of RAs.

- Market allocation

The concern with **market allocation** is that retailers might use their collaboration in a RA in order to allocate markets. Most European alliances do not have more than one affiliate from the same Member State, which may be seen as a deliberate strategy in order to comply with the criteria laid down in the Horizontal Cooperation Guidelines or to avoid entering into partnerships with competitors for strategic reasons. On the other hand, it was questioned whether this may also be an outcome of market allocation practices (Bauer, 2019). The recent investigation by the European Commission is an example of a situation in which RAs may have provided a setting in which retailers engage in anticompetitive collaboration in order to limit expansion of their shop networks or align the prices they charge to consumers (Box 4).

**Box 4. The European Commission's investigation into possible collusion by two French retailers in a purchasing alliance**

When actual or potential competitors avoid entering into each other's markets, they avoid competition among themselves. The ongoing Commission investigation, announced on November 4th 2019, into a possible collusion among retail chains Casino and Intermarché exemplifies this concern. The two retail chains had set up the joint venture 'Inca-achats' for the purchasing of branded products in November 2014. The buying joint venture was

<footnote n="103">¹⁰³ Joined Cases T-217/03 and T-245/03 FNCBV and Others v Commission (French Beef) [2006], ECLI:EU:T:2006:391, paragraph 83 and Case C-8/08 T-Mobile Netherlands [2009] ECLI:EU:C:2009:343, paragraph 37.</footnote>
dissolved in 2018. According to the press release: 'The Commission is concerned that Casino and Intermarché went beyond the purpose of their alliance and engaged in an anticompetitive conduct. In particular, the Commission will investigate whether Casino and Intermarché coordinated their activities on the development of their shop networks and their pricing policy towards consumers.'<fnref n="104" />

- Output restriction

Another restriction by object which might be alleged, is the issue of **coordinated output restriction** by means of joint delisting. According to stakeholders' comments at the workshop, coordinated delisting occurs when suppliers fail to reach an agreement with (a member of) the RA. In this case, the relevant products are taken off the shelves by all affiliates of the RA (Larracoechea, 2019; Bauer, 2019). The argument was made that the practice is reminiscent of an output restriction because products are taken off the shelves (Bauer, 2019); of course, it remains to be seen to what extent this argument will be accepted by the authorities and the courts. The issue of coordinated delisting might also be discussed under unfair trading practices legislation (such as Directive (EU) 2019/633 or national legislation, such as the Anzapfverbot in Germany)<fnref n="105" />, which will be addressed separately in Sections 4.4 and 4.5 below.

- Information exchange

**Information exchange** has been cited as one of the competition concerns associated with alliance members, the suspicion being that information exchanged for the purpose of carrying out the RA activities might be used by parties for other purposes, such as coordinating market behaviour. Here it is relevant to distinguish between deliberate exchanges of sensitive information among alliance members in the context of a given alliance, and general transparency on the market as a result of dynamics in RA membership. An example of how exchange of sensitive information may happen in the context of an alliance can be found in Box 5 below.

As regards the legal assessment of information exchange between competitors, there is a separate chapter in the Horizontal Cooperation Guidelines dedicated to this topic. Specifically with respect to joint purchasing agreements, the Guidelines note that the exchange of information will not be assessed separately but in the light of the overall effects of the agreement (HG, 216). However, one must note that there have been some developments with respect to how exchange of information is treated: notably, some types of information exchange have been declared by the Court of Justice of the European Union to be restrictions of competition 'by object'. The Court of Justice has held that 'an exchange of information which is capable of removing uncertainty between participants as regards the timing, extent and details of the modifications to be adopted by the undertakings concerned in their conduct on the market must be regarded as pursuing an anticompetitive object',<fnref n="106" /> and this is so 'even if that there is no direct connection between that practice and consumer prices'<fnref n="107" />. This case law, which is more recent than the Horizontal Cooperation Guidelines of 2011, would be relevant to the assessment of information exchange taking place in the context of an alliance.

**Box 5. Information exchange via partnership fees: the case of Centrale Italiana<fnref n="108" />**

Affiliates of the RA Centrale Italiana had to pay participation fees to the alliance. The fees were calculated in proportion to the respective participation in the share capital. There was an additional annual fee paid to Coop Italia in order to compensate it for providing the know-how, internal structures and human resources for the operation of the RA. This

<footnote n="104">¹⁰⁴ European Commission Press Release, 'Antitrust: Commission opens investigation into possible collusion by two French retailers in a purchasing alliance' (4.11.2019) <https://ec.europa.eu/commission/presscorner/detail/en/IP_19_6216></footnote>

<footnote n="105">¹⁰⁵ The Anzapverbot is a provision of German Competition law which prohibits the abuse of economic dependence by undertakings with relative or superior market power.</footnote>

<footnote n="106">¹⁰⁶ Case C-286/13 P Dole Food Company v European Commission ECLI:EU:C:2015:184, paragraph 122</footnote>

<footnote n="107">¹⁰⁷ Case C-286/13 P Dole Food Company v European Commission ECLI:EU:C:2015:184, paragraphs 123</footnote>

<footnote n="108">¹⁰⁸ Based on the contribution by Mr. Clementi of the Italian Antitrust Authority. A detailed summary of the Centrale Italiana case is available in Annex 2.</footnote>
annual fee was equal to a percentage of the volume of the affiliate's own turnover made through negotiation by Centrale Italiana. Thus, affiliates had to reveal the turnover made through Centrale Italiana in order to justify the amount of additional fee. The result was a flow of data to the RA, which essentially revealed how much turnover the affiliate had made through joint activities.

The information exchanged thus concerned not only costs and conditions of purchase, but also invoices of purchases made and various product sales. Centrale Italiana knew how much turnover each affiliate had made on given purchases.

The RA and its affiliates were barred from disclosing to third parties confidential information about the contracts they had; they were obliged to adopt adequate protection systems for sensitive data and contractual information.

The Italian Antitrust Authority suspected that the parties had used Centrale Italiana as a vehicle in order to achieve further forms of collaboration and started an investigation in 2013, and indeed considered the RA agreement was likely to produce anticompetitive effects both on the upstream and downstream markets. Centrale Italiana was dissolved in 2015.

- Price collusion

The theoretical economic literature points to the possibility that RAs may seek to achieve collusion through a combination of high input prices and slotting allowances<fnref n="109" /> (see section 3.3 and Foros and Kind, 2008; Doyle and Han, 2014). Such a strategy would not only make the collusion more difficult to discover but might also take away the possible benefit of the RA for consumers when the collusive effect outweighs the pass-through of slotting allowances to consumers (Doyle and Han, 2014). For an example of the issue of pass-through of slotting allowances, see Box 8.

With respect to discussions on collusion, it should be noted that a collusive outcome can also arise without an explicit agreement to harm competition. A collusive outcome without active collusion may be the result of the joint procurement itself. In its Guidelines, the Commission suggests that an assessment should be made of whether a collusive outcome is possible. In this assessment, it is relevant whether the parties have market power and whether the characteristics of the market are such so as to be conducive to collusion (HG, 213). Restrictive effects are considered more likely if the parties purchase a significant part of their products together, and have a significant degree of market power (HG, 201), and if the joint procurement results in a high degree of communality of costs, i.e. when parties to the RA have 'a significant proportion of their variable costs in the relevant downstream market in common' (HG, 214) such that the operators may become so aligned that they lose the ability and the incentive to distinguish themselves and compete (Chauve, 2019).

## Analysis of restrictions 'by effect'<fnref n="110" />

In the absence of 'by object' restrictions of competition, the assessment of Article 101 TFEU consists of an investigation of potential restrictions of competition 'by effect'. Insofar as they are collaborations between actual or potential competitors, RAs can be assessed under the rules applicable to cooperation between competitors (the Horizontal Cooperation Guidelines).<fnref n="111" /> However, as already noted, insofar as alliances engage in contracts with suppliers (vertical restraints), their activities might also need to be assessed by reference

<footnote n="109">¹⁰⁹ Doyle and Han (2014) discuss how a buyer group allows retailers to commit credibly to increased input prices, which serve to reduce combined final output to the monopoly level; increased input costs are then refunded from suppliers to retailers through slotting allowances (see footnote 26) or rebates.</footnote>

<footnote n="110">¹¹⁰ Article 101 TFEU prohibits all agreements between undertakings, decisions between associations of undertakings, or concerted practices 'which have as their object or effect' the restraint of competition. As noted above, the Court of Justice of the European Union has established a different standard of assessment for restrictions by object and restrictions by effect. In the case of the former, authorities or plaintiffs need not prove that the restriction has a negative effect on competition. In the case of the latter, authorities or plaintiffs need to delve into the economic impact of a restraint.</footnote>

<footnote n="111">¹¹¹ As stated before, insofar as alliances engage in contracts with suppliers (vertical restraints), their activities might also need to be assessed by reference to the Block Exemption Regulation on Vertical Restraints, and – if not covered by the block exemption – individually under Article 101 TFEU (HG, 195-196).</footnote>
to the Block Exemption Regulation on Vertical Restraints, and – if not covered by the block exemption – individually under Article 101 TFEU (HG, 195-196).

The Guidelines set out the Commission's approach to joint purchasing arrangements which do not involve restrictions of competition by object, thus providing an analytical framework for assessing 'restrictions by effect' in the context of joint purchasing. As to restrictions by object, these are not subject to the same analysis and do not benefit from the safe harbours mentioned below. Restrictions by object – once identified – are considered prohibited; however, they may still benefit from an exemption under Article 101(3) TFEU.

The Horizontal Cooperation Guidelines recognise that joint purchasing may produce substantial efficiencies. This is in line with the pronouncements of the Court in the *Gøttrup-Klim* case, where the Court of Justice of the European Union observed in relation to the assessment of a purchasing cooperative of farmers that: '*in a market where product prices vary according to the volume of orders, the activities of cooperative purchasing associations may, depending on the size of their membership, constitute a significant counterweight to the contractual power of large producers and make way for more effective competition.'*<fnref n="112" />

According to the Horizontal Cooperation Guidelines, RAs are not likely to lead to anticompetitive effects when the parties to the collaboration have a combined market share not exceeding 15% (referred to as the 'safe harbour') on either the upstream or on the downstream markets (HG, 208).<fnref n="113" /> This means that the potential for the creation of power or limitation of competition must be considered both upstream (e.g. towards suppliers) as well as downstream (e.g. towards consumers). The Commission notes that the 15 % threshold is to be considered rigorously and requires high quality data (Chauve, 2019). Often the data available is aggregate, e.g. for the national level; while at the local level the concentration may be much higher than suggested by aggregate national market shares. For instance, it was reported that there are six major retailers in the French market, but reports suggest that in the majority of urban areas there are no more than four players competing (Chauve, 2019).

Another situation which is not deemed to be problematic under the Guidelines, is when the members of a purchasing collaboration are not competitors on the same relevant selling market (HG, 212), as is the case in most of the European RAs (Bauer, 2019). This possibility to escape the prohibition in Article 101 (1) TFEU, however, ceases to apply if '*the parties have a position in the purchasing markets that is likely to be used to harm the competitive position of other players in their respective selling markets.*' (HG, 212). This suggests that alliances consisting of entities which are not direct competitors on the downstream market, may nonetheless be subject to further scrutiny in order to ensure that there are no adverse effects on competition in the different national markets.

For purchasing arrangements which cannot benefit from the above-mentioned safe harbour and cannot be exempt on grounds that they are not competitors downstream, a detailed assessment of effects on the market is needed (HG, 209). Such an assessment takes into account factors such as market concentration and the possible countervailing power vis-a-vis strong suppliers (HG, 209). The assessment involves verifying effects such as likelihood of quality reductions, lessening of innovation and sub-optimal supply as a result of increased buyer power (HG, 202). The analysis should consider possible negative effects both on the purchasing and on the selling markets (HG, 207). The efficiencies generated by the collaboration are weighed against possible anticompetitive effects. On the basis of this analysis, the authority may decide that the agreement is not in breach of Article 101 (1) TFEU in the first place because its effect is insufficient to constitute a restriction of competition. If that is the case, there is no need to consider the exemption criteria under Article 101 (3) TFEU. If, however, on the basis of the analysis the authority decides that the collaboration is in breach of Article 101 (1) TFEU, the parties to the collaboration may invoke the exemption under Article 101 (3) TFEU.

<footnote n="112">¹¹² Case C-250/92 *Gøttrup-Klim* e.a. *Grovvareforeninger v Dansk Landbrugs Grovvareselskab* AmbA ECLI:EU:C:1994:413, paragraph 32.</footnote>

<footnote n="113">¹¹³ That is, unless the restriction is 'by object'. On restrictions by object see section 4.2.</footnote>
Two examples of how authorities may approach the assessment of a RA while taking account of the relevant economic context and the impact on consumer and suppliers is presented below. Box 6 describes the assessment of the *Retail Trade Group* case by the German Competition Authority, which was concluded in favour of the alliance, which was believed to benefit both consumers and suppliers by preserving competition in both retail and procurement markets. Box 7 describes parts of the assessment of the *Centrale Italiana* case by the Italian Antitrust Authority, which led to the conclusion that the RA agreement was likely to produce anticompetitive effects both on the upstream and downstream markets and thereby violating Art. 101 of TFUE.

**Box 6 Assessing a RA under the Horizontal Cooperation Guidelines – the case of Retail Trade Group (RTG) in Germany<fnref n="114" />**

There are eight supermarket chains outside the top four in Germany and seven of them, except Globus, decided to form the national RA Retail Trade Group.<fnref n="115" /> Most of these chains are family businesses so the possibility of a merger was not attractive. Retail Trade Group was founded in April 2017 as a joint venture providing services to the parties in the areas of purchasing, e-commerce, logistics and administration. The parties continued to operate independent distribution channels on the sales markets.

On the procurement side, the joint shares of the alliance were less than the 15 % threshold set in the European Commission's Horizontal Cooperation Guidelines of 2011. On the sales side, the parties were active mainly in different regional areas but there were also overlaps, e.g. with two members of the RTG active in the same area. In a couple of local markets they had high joint market shares on the sales side, surpassing the 15% threshold.

Nevertheless, the German Competition Authority had no objections to the formation of the alliance. In fact, it considered that there was a significant positive effect. The four major food retailers, i.e. EDEKA, REWE, the Schwarz group and Aldi, dominated more than 85% of the market. This competitive situation ensured that the scope of action of RTG would remain sufficiently controlled. The German Competition Authority considered that the alliance would boost the competitiveness of the smaller retailers vis-à-vis the big four players while allowing them to retain their independence.

The collaboration was also considered important for suppliers as it would preserve a competitive alternative distribution channel for suppliers. Following the assessment, the German Competition Authority considered that the RTG alliance is a positive development on the market – both for consumers and for suppliers.

**Box 7 Assessing a RA under the Horizontal Cooperation Guidelines – the case of Centrale Italiana (Italy)<fnref n="116" />**

In the case of *Centrale Italiana*, a national RA of competing chains in the large-scale retail sector in Italy, the Italian Antitrust Authority assessed the possible restrictive effects on both the supply markets (upstream) and the consumer market (downstream).

Restrictions in the upstream market were deriving from the possession of strong purchasing power. The combined market share of the alliance members was on average 23% of the procurement markets: a figure that indicated a high market power towards the producers (with respect to competing RAs), reinforced by the territorial distribution of the affiliates' sales quotas, far exceeding 40 percent in many local markets. It was considered that such power could lead to a reduction in the ability to compete of contractually weaker producers, with negative consequences, in the medium term, on the variety and quality of the products (depletion of supply).

<footnote n="114">¹¹⁴ Based on the contribution of Dr. Engelsing by the German Competition Authority (Bundeskartellamt).</footnote>

<footnote n="115">¹¹⁵ According to information provided by LZ Retailytics and presented by Dr. Engelsing of the German Competition Authority, the top four retailers in Germany are, EDEKA, REWE Group, Schwarz Gruppe, and Aldi.</footnote>

<footnote n="116">¹¹⁶ Based on the contribution by Mr. Clementi of the Italian Antitrust Authority. A detailed summary of the Centrale Italiana case is available in Annex 2.</footnote>
On the local distribution markets (downstream), the agreement in question was deemed likely to produce negative effects in terms of coordination of sales policies or, at least, of strong reduction of incentives for reciprocal competition between member companies and / or members of Centrale Italiana.

The Italian Antitrust Authority assessed that the RA agreement was likely to produce anticompetitive effects both on the upstream and downstream markets and were leading to a violation of Art. 101 of TFUE.

## Theories of harm

An 'effects analysis' requires considering how the collaboration affects the level of competition on the market. One of the worries of competition law is that agreements between companies may lead to the exclusion of some competitors, thereby leading to increasing concentration and limited competition. Such concerns are termed 'foreclosure concerns'. The possible negative effect of increased buyer power on innovation by suppliers, and thus therefore on product variety for consumers can be assessed under competition law, as for example in the case of *Centrale Italiana* (see Box 7 above). As it is not obvious that collaboration between companies necessarily leads to lower competition or reduced upstream innovation, authorities will need to expound a credible theory of harm – that is, an explanation of the mechanism whereby the conduct assessed will harm competition in the present or in the near future. A theory, however, is not sufficient to find that a certain kind of collaboration is has anticompetitive effects. Theories of harm need to be substantiated by evidence. Participants in the workshop identified two main theories of harm with respect to foreclosure of competitors, which may be relevant for the assessment of RAs – the waterbed effect and spiral effect. A possible theory of harm with respect to innovation by suppliers was not discussed at the workshop, and would seem more difficult to substantiate, given that the effects on innovation are ambiguous (see also section 3.2 and 3.4)<fnref n="117" />.

It should be noted that these theories of harm are not specific to Article 101 TFEU assessment; they may be analysed under Article 102 TFEU in the case of a dominant position, and under the respective rules on control of concentrations in the case of mergers and acquisitions. The Commission's approach to these theories in the context of Article 101 TFEU investigation is discussed in the Horizontal Cooperation Guidelines; this is notwithstanding the fact that concerns about foreclosure in the case of vertical relations (e.g. agreements between the RA and suppliers), would have to be analysed separately under the Block Exemption Regulation for vertical restraints and the accompanying guidelines. For an economic explanation on these effects, see section 3.3.

### - The waterbed effect

The waterbed effect theory of harm captures the idea that lower prices for some buyers might translate into higher prices for other buyers, the assumption being that the buyers benefitting from the low price are powerful whereas the buyers faced with a higher price are weak. This inequality in terms of purchasing prices might cause a detrimental effect for the smaller buyer thereby creating foreclosure on the retail market. This theory of harm is recognised in the Horizontal Cooperation Guidelines, which note that joint purchasing may raise concerns about foreclosure of competing purchasers by 'limiting their access to efficient suppliers' (HG, 203).

The contributions at the workshop indicate that authorities are familiar with the waterbed effect theory of harm and prepared to investigate it. The waterbed effect has been considered in the context of merger control cases (Bauer, 2019; Chauve, 2019). The German Competition Authority investigated the waterbed effect in its assessment of the *EDEKA/Plus* (2008) and *EDEKA/Trinkgut* (2010) mergers. The UK Competition and Markets Authority also discussed it in the *Sainsbury/Asda* (2019) merger review. The European Commission also does not ignore the waterbed effect; however, it was noted that it is

<footnote n="117">¹¹⁷ Denicolò and Polo (2018) provide an appraisal of the 'innovation theory of harm' in the context of horizontal mergers, but conclude that there is no strong general theory of harm, as the effect may go both ways and a case needs to be built on facts on a case by case basis.</footnote>
difficult to substantiate the waterbed theory of harm (Chauve, 2019). Although the effect
has been considered in merger investigations, there are no examples of antitrust case
involving the waterbed effect. This should not be taken to mean this theory of harm does
not materialise but indicates that this is an area in which more research is needed (Chauve,
2019).

- Spiral effects

Another theory of harm is the so called 'spiral effect'. If a retailer obtains lower purchasing prices through the alliance, this is expected to translate into lower selling prices, which result in more customers for the retailer; this in turn generates higher volumes for the retailer in question, thereby creating higher buying power, which once again leads to lower purchase prices.

The spiral effects theory has been considered by authorities, especially in the context of merger control. Examples have been provided of both Commission decisions and national decisions. For instance, the spiral effects theory was discussed in the Commission's merger cases REWE/Billa (1996) and REWE/Meinl (1999) (Bauer, 2019).<fnref n="118" /> At the national level, the German Competition Authority considered the spiral effects theory in its review of the merger EDEKA/Plus (2008); the theory was also alleged in the application to the minister in the 2015 merger case EDEKA/KT.

Just as with the waterbed theory of harm, the examples come from the merger practice of authorities but there is no evidence of a successful investigation related to horizontal cooperation agreements under Article 101 TFEU. The Commission takes these theories of harm seriously, but just as just as with the waterbed effect, they have to be substantiated with evidence (Chauve, 2019).

- Reverse waterbed effect

The EDEKA Wedding Rebates case presents an interesting example of the opposite of the waterbed effect: namely, suppliers offering lower prices to smaller buyers rather than to larger buyers. This practice may backfire for the supplier if a larger buyer discovers that a competitor has obtained better purchasing terms from the supplier in question. This was an issue which surfaced in the EDEKA 'Wedding Rebates' case (Engelsing, 2019). When EDEKA acquired a number of supermarkets from Plus, it discovered discrepancies between the terms offered by some suppliers to Plus and those offered to EDEKA. Generally, EDEKA enjoyed better terms of contract but there were instances in which Plus had received better conditions from some suppliers. Suppliers might have been motivated to do so in order to keep an additional distribution channel on the market and, given the lower purchasing volume of Plus, they would have been able to afford accepting a lower price (Engelsing, 2019). Upon merging with Plus, EDEKA demanded that suppliers retroactively adjust their terms to EDEKA to match the more advantageous conditions they had temporarily granted to Plus before the merger was implemented. <fnref n="119" />

The German Competition Authority considered that such a practice of ex post review of the
terms received by a competitor might have a chilling effect on suppliers' willingness to offer
discounts. If suppliers know that there is a chance that a smaller retailer would be acquired
and that then they would have to offer the better conditions to the big companies as well,
they might never dare to offer better terms to the smaller retailers in the first place
(Engelsing, 2019). More information about the case is provided in Box 10.

This discussion gives examples of the variety of mechanisms whereby competition may be
harmed in the context of collaboration between competitors. However, as the examples
discussed above show, actual investigations may reveal other ways in which

<footnote n="118">¹¹⁸ However, the Commission did not consider that same possible effect in the REWE/Adeg (2008) merger even though it was on the exact same market and concerned the same buyer (Chauve, 2019).</footnote>

<footnote n="119">¹¹⁹ For more information, see Bundeskartellamt (German Competition Authority), 'Federal Court of Justice confirms key points of Bundeskartellamt's landmark decision concerning unfair trading practices' (Press Release of 29.01.2018) <https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2018/29_01_2018_EDEK_A_BGH_Entscheidung.html></footnote>
anticompetitive strategies are implemented. In practice, this should not pose an issue for competition authorities due to the broad scope of Article 101(1) TFEU.

## Exemption criteria under Article 101 (3) TFEU

Exemption under Article 101 (3) TFEU requires that four cumulative conditions be met: (i) the agreement, decision or practice should generate efficiency gains such as lower purchasing prices or reduced transaction, transportation and storage costs, or gains thanks to economies of scale (HG, 217); (ii) the restrictions must be indispensable to achieve the claimed efficiencies and not go beyond what is necessary to achieve those efficiencies (HG, 218); (iii) these efficiency gains must be passed on to consumers 'to an extent that outweighs the restrictive effects on competition' caused by the collaboration (HG, 219); and finally, (iv) the restrictions may not eliminate competition 'in respect of a substantial part of the products in question' both on the purchasing and on the selling markets (HG, 220). All four conditions must be satisfied before an exemption can be granted.

RAs may generate important efficiencies both for retailers and for suppliers, as discussed in section 3. However, one of the crucial conditions under Article 101 (3) TFEU is that a 'fair share' of these efficiencies be passed on to consumers in the form of lower prices or increased product variety. The Horizontal Cooperation Guidelines note that the likelihood that retailers will pass the efficiency gains on to consumers is lower when the RA affiliates' market power on the selling market increases (HG, 219). In such cases, authorities might decide that there is insufficient pass-through to justify an exemption for a collaboration between retailers.

It was suggested that a case in which no pass-through was found likely, due to the parties' significant market power on the selling market, was in the German Competition Authority prohibition decision in the EDEKA/KT merger in 2015 (Bauer, 2019). The decision was however overturned by ministerial authorisation in 2016, including a commitment to safeguard jobs (Engelsing, 2019). The question of pass-through was similarly crucial in the Norwegian Competition Authority decision to prohibit the ICA-Norgesgruppen collaboration. In this case, the likelihood of pass-on to consumers was found to be limited as the parties were likely to receive the lower prices in the form of slotting allowances (lump sum payments from suppliers). The case is discussed in Box 8 below.

### Box 8. Slotting allowances, transparency, and pass-through: the case of ICA-Norgesgruppen (2014)<fnref n="120" />

The Norwegian Competition Authority reviewed the collaboration between Norgesgruppen (number one retailer in terms of market share in Norway) and ICA (number four retailer at the time). The two entities represented slightly more than 50 % of the total market upstream and 50 % of the overall sales downstream on a market dominated by four main retailers. The parties were not always direct competitors in the same markets but were jointly present in a number of markets. The concern was that this joint presence would limit competition between the two parties and also that it would create transparency. The Norwegian Competition Authority considered that given their size, the two parties would jointly be the biggest buyer on the market. However, the Norwegian Competition Authority considered that they would not be likely to pass on the benefits of prices decreases, as they would capture the benefits via slotting allowances. The collaboration was prohibited.

## 4.3 Article 102 TFEU : abuse of dominant position

Article 102 TFEU may also be relevant in assessing the conduct of RAs. Article 102 TFEU prohibits both exclusionary conduct and exploitative conduct. Exclusionary conduct refers to conduct leading to the foreclosure of competitors. Here, the foreclosure theories explored in Section 4.2.3. can also be relevant.

However, unlike Article 101 TFEU, Article 102 also prohibits exploitative conduct, that is unfair prices, terms and conditions, when it is imposed by dominant companies. The

<footnote n="120">¹²⁰ This box was developed on the basis of the contribution by Mr. Chauve.</footnote>
concept of 'unfair terms' is not precisely defined and there is no exhaustive list of abuses. It would be possible to consider complaints about unfair trading practices such as delisting, retroactive requests, no pay for performance, and a shift of business risks under this provision. However, the possession of a dominant position is a prerequisite for applying this provision (Bauer, 2019).

An example of applying Art. 102 TFEU to the conduct of a RA was provided by the Italian Antitrust Authority (See Box 9 below). The case concerns misuse of administrative procedures in order to prevent a competitor from entering local markets.

**Box 9. Abuse of dominant position to foreclose a competitor: Esselunga/Coop Estense (2012)<fnref n="121" />**

In 2012, the Italian Antitrust Authority found that Coop Estense had abused its dominant position by systematically blocking attempts by competing retailer Esselunga to open new retail shops in areas which were potentially ideal for opening such shops. The markets were characterised by limited availability of suitable spaces and high administrative barriers to entry. Coop Estense systematically intervened in the administrative procedures started by Esselunga in order to obtain the necessary permits. Coop Estense was fined by the Italian Antitrust Authority.

Because Article 102 TFEU requires plaintiffs and authorities to prove a dominant position, its scope of application is more limited than Article 101 TFEU. Proving that a RA is in a dominant position is difficult, which means Article 102 TFEU is seldom triggered in the case of RAs (Bauer, 2019).

**4.4 Directive (EU) 2019/633 on Unfair Trading Practices**

Directive (EU) 2019/633¹²² was adopted in 2019 with the aim of addressing unfair trading practices in the agricultural and food supply chain. Member States have until 1st May 2021 to transpose the Directive into national law and until 1st November 2021 to start applying the implementing measures. This is obviously a process which is still ongoing in the Member States.

Directive (EU) 2019/633 applies to the conduct of a group of natural and legal persons who buy agricultural and food products,<fnref n="123" /> where the buyers and the suppliers from whom they purchase fall within certain turnover thresholds, as specified in the Directive.<fnref n="124" /> The Directive is meant to protect weaker suppliers from the behaviour of stronger buyers, whereby the economic strength is expressed in terms of turnover categories. However, this protection is not unlimited. The Directive does not cover relationships in which suppliers have an annual turnover exceeding EUR 350 million. Thus, it is not obvious that the Directive would apply to the activities of RAs, given that their primary focus is on goods supplied by companies exceeding the thresholds established by the Directive. As stated above, European and national alliances mainly deal with packaged goods, rarely engage in sourcing of fresh goods, and normally do not have direct contacts with farmers and smaller undertakings.

One of the legal experts raised that the limitation of EUR 350 million for supplier turnover is a limitation in the Directive when unfair practices could possibly lead to a cascading effect in the form of the passing on of price pressures upstream to farmers. Such a pass-through of negative impacts was argued to be even more likely if the supplier is a large enterprise (Bauer, 2019).

Besides the fact that the trading partners of RAs would typically not fall under the scope of the Directive because of their large size, it is not clear to what extent the issues raised by stakeholders at the workshop could be captured by the Directive. The Directive includes

<footnote n="121">¹²¹ This example was provided by Mr. Clementi of the Italian Antitrust Authority and Raffaelli et al., (2015)</footnote>

<footnote n="122">¹²² Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain OJ L 111/59.</footnote>

<footnote n="123">¹²³ Article 2(2) of Directive 2019/633.</footnote>

<footnote n="124">¹²⁴ To determine the applicability of the Directive, one must determine the turnover of both the buyer and the supplier involved in the transaction, and decide whether they fall within the threshold schedule as laid out in Article 1 of Directive 2019/633.</footnote>
a black list of practices which are *per se* prohibited and a grey list of practices which are prohibited unless they have been agreed in advance in clear and unambiguous terms.

One of the issues mentioned is a so called '6+1' practice: the requirement that a supplier must reach an agreement with all members of a RA and the alliance itself within a certain deadline; failure to do so would result in a delisting of the products concerned by all members of the alliance, including by those with whom an agreement had been reached (Larracoechea, 2019, Bauer, 2019).<sup>125</sup> Other issues mentioned were concerns about forced or fictitious services (Bauer, 2019), the realistic value of those services relative to the fees (Engelsing, 2019), and potential double charges for the same service, e.g. a listing fee at the European level and a listing fee at the national level (Larracoechea, 2019; Dobson, 2019). It is not clear to what extent these practices would be prohibited under the Directive. Notably, with respect to the grey list of practices, these are prohibited only insofar as they have not been agreed in clear and unambiguous terms in advance<sup>126</sup>. This has raised the criticism that agreements might be misused to include abusive terms, thereby undermining the purpose of the legislation (Bauer, 2019).

Directive (EU) 2019/633 provides a minimum set of prohibited practices that all EU Member States must implement. Member States can go beyond these minimum requirements and implement legislation with stricter provisions than those laid down by the Directive, both in terms of the list of practices covered, and as regards the scope of companies and relations considered. As discussed in the next section, quite a number of Member States already have a regulation on unfair trading practices in place, as illustrated in the next section.

## 4.5 Member State Legislation: unilateral conduct and unfair trading practices

Various pieces of legislation under public or private law might be relevant to the operation of RAs at the Member State level. The focus in this section is on national competition law provisions and legislation on unfair trading practices. The former is important because competition rules are not fully harmonised in the European Union. Whereas the application of Article 101 TFEU is harmonised within the EU, there is room for divergence at the national level with respect to rules on unilateral conduct. Pursuant to Regulation 1/2003, Article 3(2), Member States may adopt stricter rules on unilateral conduct than those provided in Article 102 TFEU. Similarly, under Article 9(1) of Directive (EU) 2019/633, Member States may maintain or introduce stricter rules on unfair trading practices. Some Member States already have provisions which provide a stricter regime for unilateral conduct than Article 102 TFEU. These provisions sometimes prohibit specific unfair trading practices, which is why they are also relevant in view of the implementation of Directive (EU) 2019/633. The experiences of Germany and Italy which have unilateral conduct provisions stricter than Article 102 TFEU will be discussed below.

### Germany: economic dependency and unfair practices under the Anzapfverbot<sup>127</sup>

German competition law has a general prohibition of unfair trading practices in Section § 19(2) no. 5 of the Act against Restraints of Competition (GWB).<sup>128</sup> This prohibition, known as *Anzapfverbot*, is applicable to companies with relative or superior market power, not just to companies in a dominant position. Companies with relative or superior market power may not request other undertakings to grant them advantages without any objective

<footnote n="125"><sup>125</sup> According to Mr. Larracoechea, a supplier must reach agreement in six countries with the members plus an agreement internationally within a deadline of 45 days. If an agreement with just one member is not reached, there is no deal in any country despite the fact that agreements with five other members have been reached.</footnote>

<footnote n="126"><sup>126</sup> Article 3(2) of Directive 2019/633.</footnote>

<footnote n="127"><sup>127</sup> This subsection and the example developed in Box 10 is based on the contribution to the workshop of Dr. Engelsing (German Competition Authority) (Engelsing, 2019).</footnote>

<footnote n="128"><sup>128</sup> For an English language version of the legislation, see http://www.gesetze-im-internet.de/englisch_gwb/englisch_gwb.html#p0057</footnote>
justification; in this regard particular account is taken of whether the other undertaking
has been given plausible reasons for the request and whether the advantage requested is
proportionate to the grounds for the request. Section § 20(2) of the GWB clarifies that this
prohibition also applies in cases of economic dependency, that is to undertakings and
associations of undertakings in relation to the undertakings which depend on them. To
assess dependency and relative market power, one needs to assess whether there is an
imbalance of power by examining the respective outside options of the parties<fnref n="129" />. An
example of how the *Anzapfverbot* can be used in cases involving unfair trading practices
in the retail sector is the *EDEKA Wedding Rebates* case (see Box 10 below).

Importantly, under German law, one has to consider whether there is an objective justification for the contractual terms. Requests for advantages from a company in a dominant position or a position of relative market power to a dependent company are prohibited when there is no objective justification. Particular account must be taken as to whether the undertaking has been given plausible reasons for the request and whether the advantage requested is proportionate to the grounds for the request.

Another issue is whether individual or overall conditions should be used as a reference
point. The German Competition Authority considers the contract in its entirety, instead of
focusing on individual terms which might appear abusive. Thus, in the Amazon case, the
German Competition Authority found that there was a bundle of various disadvantages or
abusive conditions. This approach is different from the approach under Directive (EU)
2019/633, which singles out individual terms and practices.

Boycotts and other restrictive practices are discussed under Section § 21 GWB. According to Section § 21 GWB (1): '*Undertakings and associations of undertakings may not request that another undertaking or other associations of undertakings refuse to supply to or purchase from certain undertakings, with the intention of unfairly impeding these undertakings*'. This provision might be relevant when there are allegations of coordinated delisting; however, one should determine whether that is boycott or another type of restrictive practice.

The position of the German Competition Authority is that tough negotiations are the expression of the freedom of contract and therefore should be allowed. The basic question considered by the authority is whether there is market power or dependency leading to an imbalance in negotiation power. Such a claim would have to be substantiated. For example, in its 2019 case against Amazon, the German Competition Authority considered that Amazon acted as a gatekeeper vis-à-vis third party sellers on the market for online marketplace services. However, on the German food retail market, this is less of an issue as there is not one gatekeeper because there are at least four major retailers.

**Box 10. Requests from suppliers following a merger: applying the Anzapfverbot in Germany**

Following its acquisition of 2000 PLUS supermarkets, EDEKA made requests for
contributions from its suppliers. According to internal documents, parties considered that
suppliers should also pay for the merger, which is why the case is referred to as the *EDEKA
Wedding Rebates* case. The German competition authority issued a prohibition decision in
2014, which was limited to requests made by EDEKA toward some suppliers of sparkling
wine. The German Competition Authority found these suppliers to be dependent given the
percentage of total sales going to EDEKA, the limited 'must-have' potential of the brands
concerned, and the fact that private brands were an outside option for the supermarket.
The prohibition was based on the *Anzapfverbot*.

The appeal Court (Oberlandesgericht Düsseldorf) in its judgement of November 2015 disagreed with the assessment. It took the view that tough negotiations are normal and there was no abuse of market power by EDEKA. However, the German Federal Court of Justice (Bundesgerichtshof) in a judgement in January 2018 confirmed the German Competition Authority in the most important issues: the relative market power of EDEKA

<footnote n="129">¹²⁹ Outside option refers to the possibility a dependent party may have realistic alternative trading partners, e.g. alternative suppliers or alternative distribution channels, which may allow it to avoid dependence.</footnote>
and the abuse consisting in demands for retroactive alignment of conditions to the best value, adjustment of payment terms, and partnership reimbursement. The German Federal Court of Justice, just like the German Competition Authority, considered that there had been an excessive shift of entrepreneurial risk from a powerful retailer to a dependent producer.

However, such cases depend on the issue of relative market power. An example to illustrate the contrary in another product market is Hudson's Bay. When Hudson's Bay had a merger in 2012, it asked its suppliers for a 1% retroactive rebate under the 'Fit for the Future' program. No suppliers (or almost none of the suppliers) paid this rebate. This practice could be considered as abusive because under German law the request itself may be considered an abuse; however, the German Competition Authority considered that there was no relative market power if no supplier actually complied with the request.

### Italy: Article 62 of the Cresci Italia Decree<fnref n="130" />

Italy has had its own provisions on unfair trading practices since 2012 when Article 62 of the Cresci Italia Decree was introduced (Decree-Law no. 1 dated 24th January 2012). Under the new law, the Italian Antitrust Authority acquired additional powers in the agri-food sector. Article 62 banned the adoption of unfair practices in the relationships between operators in the food and agriculture sector. The goal of the law was to protect suppliers and to avoid the imposition of unjustifiably burdensome conditions in commercial contracts. Article 62 introduces the concept of "significant imbalance" between bargaining parties (supplier and buyers), which is to be understood as the existence of an asymmetry between the parties due to their different bargaining power. However, the existence of significant imbalance in bargaining power is not *per se* an assumption of unfair conduct. Unfairness must be proved in assessing the specific conduct.

Article 62 also introduced specific requirements for contracts concerning the sale of agricultural and food products (the exception are contracts concluded with final consumer): the contracts must be in written form and indicate the duration, the quantity, and characteristics of the product sold, the price and the terms of delivery and payment. In the absence of these elements, the contract is considered null and void.

To exemplify the type of enforcement under Article 62 of the Cresci Italia Decree, one may consider the two recent investigations described in Box 11 below.

### Box 11. Applying unfair trading practices in the agricultural and food supply chain under Italian legislation

Case AL14 (2016) concerned the commercial relations and contractual conditions between pear suppliers and two retailers (COOP ITALIA/Centrale Adriatica). Two retail operators abused their position of commercial strength to impose a series of excessively onerous discounts and economic contributions on the weaker parties to the contract. The Italian Competition Authority considered that the requests were disproportionate given the relationship between the parties and that they would weigh heavily on the agreed list price. The conduct of the companies was found to be contrary to the principles of transparency, correctness, proportionality and reciprocal services for payment. The retail operators have been fined.

Case AL15 (2019) concerned commercial relations and contractual conditions between bread producers (bakeries) and large retailers. The complaint was made by the National Association of Bread-makers against some retail chains about requirements related to unsold goods. The conduct consisted in imposing on suppliers of fresh bread the obligation to withdraw and dispose of the entire quantity of in-stores unsold bread products at the end of the day at the supplier's own expenses.

<footnote n="130">¹³⁰ This subsection and the example in Box 11 is based on the contribution to the workshop of Mr. Clementi (Italian Antitrust Authority) (Clementi, 2019).</footnote>
## 4.6 Conclusions

RAs may generate important efficiencies in terms of lower prices for consumers, diversity of products, and cost savings. They help create a single European purchasing market and contest territorial supply constraints, where such constraints are imposed by suppliers on the internal market.

Nonetheless, authorities should remain vigilant in order to address possible concerns arising under EU competition law, the Unfair Trading Practices Directive, and relevant national legal provisions. The practice of national and European authorities reveals that in addition to benefits, RAs may also lead to some anticompetitive effects such as creating potential for collusion or reducing competition, which may negatively affect consumers or upstream supply chain actors. Some concerns were also mentioned with respect to possible unfair trading practices.

With respect to competition law, Article 101 TFEU applies to any horizontal agreements, and the application of Article 102 TFEU depends on whether a RA is found to hold a dominant position. Regarding unfair trading practices, there was some disagreement as to whether the scope of Directive (EU) 2019/633 is sufficient, since it only extends to transactions between buyers and suppliers falling within certain specified turnover thresholds. In the case of European RAs purchasing from major A-brand suppliers, both buyers and suppliers will likely exceed the upper thresholds, thereby falling outside the scope of protection of the Directive. In some cases, however, potentially stricter national legislation on unfair trading practices may apply.

Authorities seem well aware of these potential concerns related to RAs. The examples provided show how the EU competition law toolbox, possibly in combination with national legislation, can be used to address these concerns. Based on the workshop contributions, the competition law toolbox seems sufficient to address potential competition law concerns that might arise in the context of RAs in both selling markets (i.e. with respect to consumers) and purchasing markets (with respect to upstream suppliers); however, there was some disagreement as to whether there is sufficient enforcement, especially regarding potential upstream impacts. Experts from authorities generally acknowledge that RAs have both benefits and costs, and stated that they will continue to actively monitor the markets concerned in order to prevent or stop problematic developments.
# 5 General conclusions

Liesbeth Colen, Joint Research Centre, European Commission, Spain

Kjersti Nes, Joint Research Centre, European Commission, Spain

Retail alliances (RAs) are not a new phenomenon, but the growing number of new alliances being set up over the past decade and the rise of international RAs, have generated renewed attention. This report looks into the potential impact of RAs on the agricultural and food supply chain, in particular at the European level. It summarises the insights and views presented at a workshop held in Brussels on 4-5 November 2019. The workshop gathered economic and legal scholars, experts from European and national competition authorities, as well as technical experts from the retail, food manufacturing and farming sectors.

RAs are horizontal alliances of retailers, retail chains or retail groups that cooperate in pooling some of their resources and activities, most importantly relating to the sourcing of supplies. By generating efficiencies from pooling volumes, and by providing a countervailing force in relation to powerful brand manufacturers, RAs play an important role in enhancing the competitiveness of retailers in a consolidating market and in strengthening their position in the context of increased price pressure of discounters, international expansion of competitors, and the entrance of digital players.

The type of alliances and the activities they engage in are diverse, and in particular, groups of independent retailers differ in their activities from national and European RAs. While members of groups of independent retailers and national RAs are active in the same national market, members of European RAs are active in different national markets. The main activities performed by RAs relate to (1) the provision of services to suppliers and the joint negotiation of purchasing terms related to those services, focusing typically on larger A-brand manufacturers and/or (2) the joint launching of tenders for sourcing private label products. In addition, several RAs engage in data sharing initiatives or information sharing concerning technological developments. Groups of small independent retailers typically engage in further collaboration, and engage in the actual buying of product. They may provide support for investments in infrastructure, distribution and logistics to their members. While European RAs deal with the large, so-called A-brand suppliers only, groups of independent retailers and national alliances may deal with a broader scope of suppliers.

This report focuses on the joint activities that relate to the negotiation with or buying from food manufacturers. It provides an economic assessment of how these activities may impact other actors in the agricultural and food supply chain, including consumers, private label suppliers, A-brand food manufacturers, and farmers, and discusses how these potential positive and negative impacts are taken into account under the applicable legal framework.

Consumers may share in the benefits when efficiencies and lower purchasing prices for retailers are passed on to consumers in the form of lower prices. The possibility of 'countervailing power' through RAs has widely been acknowledged by economists and is explicitly considered in the legal assessment of RA under competition law. The degree to which consumers may benefit from lower prices depends on the nature of the contract between retailers and suppliers, as well as on the extent of downstream competition. As regards alliances of small national players and European alliances, whose members are typically active in different markets, at least some reduction in consumer prices can be expected due to downstream competition. The impact on the product variety offered in retail outlets is also relevant in assessing how RAs affect consumer welfare, but it is difficult to establish a priori, as the impact may go both ways.

The impact of the formation of RAs on the degree of retail competition is also relevant to consider, both regarding the impact this may have for consumers, as regarding the upstream implications. In the longer run, the impact of RAs on the degree of retail competition may increase or decrease, thereby enhancing or limiting the lowering effect on consumer prices. Besides, the degree of retail concentration will also affect the number
of alternative sales channels for suppliers. Moreover, agreements between retailers may facilitate anti-competitive behaviour. However, these concerns apply mainly to national RAs whose members are active in the same markets; it does not necessarily apply to European RAs whose members operate in different countries. Yet, some concerns – for example, regarding market allocation – may apply to RAs that have members from different geographical markets. While this cannot be assumed to be a practice - alliances have strict rules of conduct in place to avoid any such anti-competitive behaviour - national and European competition authorities are aware of this risk and any possible unlawful activities. Overall, European competition law has a well-developed set of rules to assess how horizontal alliances affect competition in the selling market, and whether the potential consumer benefit is considered sufficient to justify competition restrictions from either the existence or the behaviour of these alliances.

RAs tend to deal with private label producers or manufacturers of branded food, so these upstream actors are directly impacted by the existence of RAs. By pooling volumes, RAs may generate efficiencies and facilitate market expansion for suppliers. By the same token, suppliers will face stronger buyer power, likely leading to a lowering of their margins, and smaller players may be excluded. The impact on suppliers' investment and innovation from RAs is ambiguous, and also the overall impact on competition between retailers is not entirely clear. Mechanisms pointing in both directions may play a role; the empirical evidence is not unequivocal. Finally, some suppliers claim that in certain cases, the strong bargaining position of RAs allows retailers to charge unjustified fees, demand sensitive information concerning production or impose unwanted services. Yet, it is hard to substantiate to what extent these practices are simply part of tough bargaining - merely counterbalancing the bargaining power that brand manufacturers build up via territorial supply constraints - or are actually harmful to suppliers.

Regarding the possible implications for farmers, it is noted that RAs, and in particular European RAs, do not deal with fresh produce and do not negotiate directly with farmers, so possible impacts are indirect. The impact on farmers will thus primarily depend on whether the market structure at the level of food manufacturing is affected by the existence of RAs, and how impacts of RAs on suppliers are passed on upstream to farmers. The typically weak position of farmers in the agricultural and food supply chain has received attention in other contexts - for instance recent EU policies and legislation strengthened recognised producer organisations, banned certain unfair trading practices and improved market transparency to help farmers. In the context of RAs specifically, the workshop did not adduce concrete evidence as to how or to what extent RAs would affect farmers.

Regarding possible harmful effects on upstream actors, EU competition law addresses potential negative effects on upstream actors (normally by way of assessing exploitative practices), as well as the abuse of possibly dominant positions. Yet, for most RAs, the concern about a dominant position is unlikely to apply, and although the legal tools are available, case law suggests that the consideration of possible upstream harm on suppliers from RAs has been limited. Regarding unfair trading practices, the EU Directive on unfair trading practices would not apply as in most situations both RAs and the suppliers they deal with exceed the turnover thresholds of the Directive.

Overall, a balanced view is necessary when considering RAs. The diversity of the forms and activities of RAs requires a case-to-case assessment and makes it hard to derive general conclusions. Overall, the experts and participants in the workshop agreed that RAs are able to generate benefits for retailers that increase their competitiveness in a competitive, consolidating and internationalising market. They also agreed that – as long as there is sufficient downstream competition – at least some of the benefits that RAs generate are likely passed on to consumers. Nevertheless, there is the possibility of increased retail consolidation and of anti-competitive practices. Under certain circumstances, the possible benefits that RAs can provide to consumers might be off-set by the possible harm inflicted on upstream actors. In such cases, a closer investigation of RAs and their behaviour may be warranted. As regards the potential harm to upstream suppliers, the case law is limited and increased attention and orientation in guidelines by competition authorities may well be desirable. The general assessment of the existing EU and national competition law and
the legislation on unfair practices and the presented case law suggest that the current legal
framework provides tools to address potential concerns and to protect both consumers and
upstream actors.
## References

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Legislation

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty OJ L 1/1

Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings OJ L 24/1

Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices OJ L 102/1

Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain OJ L 111/59

Soft law
Commission Notice on the definition of a relevant market for the purpose of Community competition law [1997] OJ C 372/03

European Commission, Guidelines on Vertical Restraints [2010] OJ C 130/1 Communication
from the Commission, Guidelines on the applicability of Article 101 of the Treaty on the
Functioning of the European Union to horizontal cooperation agreements [2011] OJ C
11/01.

European Commission, Commission Staff Working Document, Guidance on restrictions of competition "by object" for the purpose of defining which agreements may benefit from the De Minimis Notice SWD(2014) 198 final (Revised Version of 03/06/2015)

Cases from the Court of Justice of the European Union

Joined Cases T-217/03 and T-245/03 FNCBV and Others v Commission (French Beef) [2006], ECLI:EU:T:2006:391

Case C-8/08 T-Mobile Netherlands [2009] ECLI:EU:C:2009:343

Case C-194/14 P AC-Treuhand AG v European Commission [2015] ECLI:EU:C:2015:717

Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH ECLI:EU:C:1991:14

Case C-250/92 Gøttrup-Klim e.a. Grovvareforeninger v Dansk Landbrugs Grovvareselskab
AmbA ECLI:EU:C:1994:413.

Case C-286/13 P Dole Food Company v European Commission ECLI:EU:C:2015:184

Case C-67/13 P Groupement des cartes bancaires (CB) ECLI:EU:C:2014:2204

Decisions of the European Commission

Commission Decision of 9 June 1989 relating to a proceeding under Article 85 of the EEC Treaty (IV/27.958 - National Sulphuric Acid Association).

Commission Decision REWE/Billa (1996)

Commission Decision REWE/Meinl (1999)

Commission Decision Rewe/Adeg (2008)

Decisions of National Competition Authorities

German Competition Authority (Bundeskartellamt) decision Edeka/Plus (2008) merger

German Competition Authority decision Edeka/KT merger

German Competition Authority decision Edeka/Trinkgut merger (2010)

German Competition Authority decision Edeka 'Wedding Rebates' case

Italian Antitrust Authority decision Case IC43 'Indagine conoscitiva sul settore della GDO'(AGCM, 2013)

Italian Antitrust Authority decision Case Esselunga/Coop Estense (2012)

Italian Antitrust Authority decision Case I768 'Centrale d'acquisto per la Grande Distribuzione Organizzata' (AGCM, 2014)

Italian Antitrust Authority decision Case AL14 'Coop Italia – Centrale Adriatica /Condizioni contrattuali con fornitori' (AGCM, 2016)

Italian Antitrust Authority decision Case AL15 'Operatori GDO/Panificatori' (6 proceedings) (AGCM, 2018)

Norwegian Competition Authority decision ICA-Norgesgruppen (2014)

Swiss Competition Authority decision Coop/Migros

UK Competition and Markets Authority decision Sainsbury/Asda merger (2019)
List of abbreviations

EU European Union

FMCG Fast-Moving Consumer Goods

HG Horizontal Cooperation Guidelines

IT Information Technology

JRC Joint Research Centre

RA Retail Alliance

SME Small- and Medium-sized Enterprises

TFEU Treaty on the Functioning of the European Union

UTPs Unfair Trade Practices
List of Tables

<table><tr><td>Table 1 Typology of retail alliances</td><td>11</td></tr><tr><td>Table 2 Overview of main European retail alliances*</td><td>12</td></tr><tr><td>Table 3. Summary of the main impacts of retail alliances on the agricultural and food supply chain</td><td>41</td></tr></table>
List of Boxes

<table><tr><td>Box 1. Double marginalisation and linear vs. non-linear contracts</td><td>25</td></tr><tr><td>Box 2: Empirical evidence of countervailing power</td><td>29</td></tr><tr><td>Box 3: European retail alliances and impact on variety</td><td>31</td></tr><tr><td>Box 4. The European Commission's investigation into possible collusion by two French retailers in a purchasing alliance</td><td>49</td></tr><tr><td>Box 5. Information exchange via partnership fees: the case of Centrale Italiana</td><td>50</td></tr><tr><td>Box 6 Assessing a RA under the Horizontal Cooperation Guidelines – the case of Retail Trade Group (RTG) in Germany</td><td>53</td></tr><tr><td>Box 7 Assessing a RA under the Horizontal Cooperation Guidelines – the case of Centrale Italiana (Italy)</td><td>53</td></tr><tr><td>Box 8. Slotting allowances, transparency, and pass-through: the case of ICA-Norgesgruppen (2014)</td><td>56</td></tr><tr><td>Box 9. Abuse of dominant position to foreclose a competitor: Esselunga/Coop Estense (2012)</td><td>57</td></tr><tr><td>Box 10. Requests from suppliers following a merger: applying the Anzapfverbot in Germany</td><td>59</td></tr><tr><td>Box 11. Applying unfair trading practices in the agricultural and food supply chain under Italian legislation</td><td>60</td></tr></table>
<figure><img src="image_5.png" /></figure>

Directorate-General for Agriculture and Rural Development and
Joint Research Centre

### The role of national and international retail alliances in the agricultural and food supply chain

**Date: 4-5 November 2019**

**Venue: Rue Van Maerlant 2, Brussels, Belgium**

**Meeting Room: 2**

In a statement linked to the draft Directive on UTPs, the European Parliament calls on the Commission to launch an analysis on the extent and effects of national and international buying alliances on the economic functioning of the agricultural and food supply chain<fnref n="131" />.

The Commission intends to kick off the analysis by bringing together in a workshop all relevant actors to help better understand the nature and functioning of such alliances, as well as their implications on the agricultural and food supply chain.

The aim of the workshop is thus to fill the current knowledge gap by structuring the debate around:

1. The functioning of national and international retail alliances

2. The economic efficiency of such alliances in the agricultural and food supply chain

3. The impacts of retail alliances on upstream operators in the food supply chains

4. The legal context and policy implications

<footnote n="131">¹³¹ Statement by the European Parliament on buying alliances, European Parliament legislative resolution of 12 March 2019 on the proposal for a directive of the European Parliament and of the Council on unfair trading practices in business-to-business relationships in the food supply chain, http://www.europarl.europa.eu/doceo/document/TA-8-2019-0152_EN.html</footnote>
Day 1: 04 November 2019

<table><tbody><tr><td>From 13:00</td><td>Registration</td><td></td></tr><tr><td colspan="3">SESSION I – Introduction</td></tr><tr><td>13:30</td><td>13:45</td><td>Welcome and introduction</td><td>Michael Scannell -<br>DG AGRI</td></tr><tr><td>13:45</td><td>14:30</td><td>What challenges do retail alliances raise and what<br>opportunities do they offer?</td><td>Paul Dobson – University<br>of East Anglia</td></tr><tr><td colspan="3">SESSION II – The economic efficiency of retail alliances and their impact on the agri-food<br>supply chain</td></tr><tr><td>14:30</td><td>15:15</td><td>The economics of buyer power and retail alliances</td><td>Christian Wey – DICE,<br>Heinrich-Heine University<br>Düsseldorf</td></tr><tr><td>15:15</td><td>16:00</td><td>The impact of retail alliances on prices and<br>product variety</td><td>Claire Chambolle - INRA</td></tr><tr><td colspan="3">BREAK (15 min)</td></tr><tr><td>16:15</td><td>17:00</td><td>A cocktail of "fresh" issues on the role of retail<br>alliances</td><td>Stéphane Caprice – TSE,<br>INRA</td></tr><tr><td>17:00</td><td>17:45</td><td>Economic impact of retail alliances on upstream<br>operators in the food supply chain</td><td>Steve McCorriston –<br>University of Exeter</td></tr></tbody></table>
Day 2: 05 November 2019

SESSION III – The functioning of retail alliances, economic and legal challenges
Chair: Marc Corstjens - INSEAD

<table><tr><td>09:00</td><td>09:30</td><td>What are European retail alliances (ERAs), what do they do, and how do they function?</td><td>Pierre Bouchut - former retail executive</td></tr><tr><td>09:30</td><td>10:00</td><td>What are national cooperative buying groups and how do they differentiate from ERAs?</td><td>Dirk Eßmann - EDEKA</td></tr></table>

BREAK (15 min)

<table><tr><td>10:15</td><td>10:45</td><td>A manufacturer's perspective on retail alliances</td><td>Ignacio Larracoechea - Industry Expert</td></tr><tr><td>10:45</td><td>11:15</td><td>Retail alliances, private labels and their impact on producers – experiences from the dairy sector</td><td>Alexander Anton – European Dairy Association</td></tr><tr><td>11:15</td><td>12:00</td><td>Debate and reflections</td><td>Marcel Corstjens - INSEAD</td></tr></table>

BREAK (60 min)

SESSION IV – Retail alliances under EU and national law
Chair: Oliver Sitar - DG AGRI

<table><tr><td>13:00</td><td>13:45</td><td>Retail alliances under EU competition law</td><td>Philippe Chauve - DG COMP</td></tr><tr><td>13:45</td><td>14:30</td><td>Theories of harm in assessing retail alliances</td><td>Michael Bauer - CMS Law</td></tr><tr><td>14:30</td><td>15:15</td><td>Retail alliances: overview of the Italian experience and case study</td><td>Lorenzo Clementi - AGCM</td></tr><tr><td>15:15</td><td>16:00</td><td>Competition aspects of retail alliances: experiences from Germany</td><td>Felix Engelsing - Bundeskartellamt</td></tr></table>

BREAK (15 min)

SESSION V – Retail alliances and potential responses: wrap-up
Chair: Bruno Buffaria - independent expert

<table><tr><td>16:15</td><td>16:45</td><td>Implications for the agri-food supply chain and potential responses by upstream operators</td><td>Zohra Bouamra-Mechemache - TSE, INRA</td></tr><tr><td>16:45</td><td>17:15</td><td>Legal framework for national and international retail alliances</td><td>Victoria Daskalova - U Twente</td></tr><tr><td>17:15</td><td>17:30</td><td>Closing</td><td>Oliver Sitar - DG AGRI</td></tr></table>
**Annex 2 Multiple restrictions on competition in the context of a retail alliance – Centrale Italiana**

Case I768 – “Centrale d’acquisto per la Grande Distribuzione Organizzata” (Centrale Italiana)<fnref n="132" />

In Dec 2013, the Italian Antitrust Authority (Autorità Garante della Concorrenza e del Mercato) opened a proceeding against Centrale Italiana (formed in 2005) for alleged violation of Art. 101 TFEU.

Form and activity

Centrale Italiana was a retail alliance of competing chains in the large-scale retail sector, created with the main objective of centralising the contracting function of the participating companies in order to obtain cost savings in the purchasing of goods. The alliance was established as a company. The Parties involved were Centrale Italiana, which consisted of four large-scale distributors including: Coop Italia (owning 69% of the shares in the company), Despar Servizi (owning 25% of the shares in the company), Il Gigante (by means of its subsidiary Gartico owning 5% of the shares in the company), Discoverde (owning 1% of the shares in the company); and Sigma, which joined the RA through a contract with Coop Italia.

The purchasing potential of the parties involved in the preliminary investigation was estimated to be on average around 23% of the procurement markets: a figure that indicated a higher market power towards the producers as compared with competing retail alliances and which was reinforced by the territorial distribution of the affiliates' sales quotas, exceeding 40 % in many local (downstream) markets.

Centrale Italiana was actually an alliance of retail alliances and distributors. Each affiliate acted as a purchasing centre for its own group and for its own affiliates, while conditions were negotiated at the higher level, by Centrale Italiana. The activity consisted of the negotiation of framework agreements with suppliers containing the main purchase conditions applicable to supply contracts. The contracts were then subsequently stipulated by the individual distribution chains. The main goal was obtaining cost savings in the purchasing of goods through collective bargaining with the suppliers.

Members of Centrale Italiana paid participation fees to the retail alliance: all the associates paid fees in proportion to the respective share capital of participation in the company but given that Coop Italia was providing the know-how of the company by means of its internal structures and human resources, the associates compensated Coop Italia with an additional annual fee, equal to a percentage of the volume of the affiliate's own turnover achieved through negotiations conducted by Centrale Italiana. Essentially, this provided a flow of data back to the retail alliance revealing how much turnover the affiliate had made through the negotiations. This was necessary in order to justify the amount of additional fee that the affiliate had to pay.

Through Framework contracts, the Centrale Italiana defined the main discounts and quantity conditional rebates, both on- and off-invoice, to be awarded either as a lump sum or as a percentage of the turnover achieved by each affiliate. In particular, Centrale Italiana was deciding on:

a) various types of on-invoice discount;

b) year-end discounts and payment conditions related to payment times and methods;

c) conditional rebates related to:

i. the realisation of promotional activities (promotional budget),

ii. the maintenance of a specific assortment (assortment discount or family discount) and variety,

iii. the inclusion of new products,

iv. the implementation of co-marketing with supplier companies.

<footnote n="132">¹³² This annex describes the case of Centrale Italiana, as presented at the workshop by Mr. Clementi (Italian Antitrust Authority).</footnote>
Suppliers were offered a large use of 'trade spending' activities, such as promotions, products' shelf expositions, distribution and sales services, all paid by producers. In the negotiation phase, additional services were contracted among suppliers and Centrale Italiana. The supplier could decide whether to renounce to the agreed services, losing the right to receive the back-payment on achievement of sales target of the specific product.

Centrale Italiana had a proper contracting team dealing with the negotiations of the Framework agreement to be proposed to suppliers. Within the Contracting Team, members of each affiliate were represented. The decision to stipulate a contract with a supplier was made within that team when two members were interested in specific products of the provider. There was a two level system negotiation.

The first level of negotiation were the Framework contracts: Centrale Italiana was contracting with suppliers and affiliates were prohibited from re-contracting the distributors already officially engaged. However, some degree of freedom was left to affiliates that could negotiate terms and conditions related to logistics and delivery and could include various types of on-invoice discount: in particular, they could put in some further conditions specific to their business relating just to logistics and delivery.

The information exchanged within Centrale Italiana in the context of the bargaining activity of the retail alliance concerned not only costs and purchase conditions, but also economic value of various products purchase and sale, through the exchange of invoices. In fact, these were some of the essential elements needed by the retail alliance in order to exert joint negotiating power. Therefore, Centrale Italiana knew how much turnover each affiliate had made on given purchases. This behaviour was considered a clear clue that the parties were using Centrale Italiana as a vehicle to achieve further forms of collaboration, such as the search for synergies of a commercial nature and the development strategies of chains.

## Market definition and Market Power

Given the structure of the retail alliance, two relevant markets were to be considered.

At upstream level, Italian Antitrust Authority considered the product market consisting in the procurement market for goods. On these markets, the RA negotiated large amount of products as a single agent. The geographical scope of the market was considered to be national. As proxy of market power, the Italian Antitrust Authority considered the general value of sales at the national level. The authority concluded that Centrale Italiana and its affiliates had a combined market share of about 23% on the procurement market for goods.

At downstream level, different product and geographic markets were defined. Product markets are defined at the local level depending on the size of the shops, where different size shops are competing asymmetrically within the same relevant market. The scope of the market is local: at the time, in 2014, the Italian Antitrust Authority considered the Italian provinces as local markets<fnref n="133" />. At downstream level the parties were estimated to have a combined share of (roughly): more than 50% in 11 Italian provinces, more than 40% in 20 Italian provinces, and more than 30% in 6 Italian provinces. In the market for stores greater than 1.500 square meters, Centrale Italiana had a market share greater than 40% in 38 provinces (with market share of more than 70% in 12 of the provinces). Therefore, at local level the parties had market power much greater than the safe harbour threshold.

Further market power at local level was raising by bilateral collaboration agreements to develop synergies in specific Italian regions. For instance, Coop and Despar had an industrial partnership to improve their supply in Sicily, whereas Despar and Distribuzione Roma (company controlled by seven of the cooperatives joining Coop Italia) had an agreement on store management in Lazio. Furthermore, a Despar affiliate had an

<footnote n="133">¹³³Note that in the analysis of merger cases, the Italian Antitrust Authority has considered catchment areas corresponding to a 20-minute drive (isochrones) up to 2019. Currently, catchment areas' extension differs according to the size of the targeted shop (10-minute driving time for convenience shops, 15 minutes for bigger shops).</footnote>
agreement to exclusively manage Sigma and Dico stores in Sardinia. The levels of collaboration and agreements in Centrale Italiana thus involved several dimensions.

## Outcome

The competition concerns during the investigation were that Centrale Italiana was effectively able to facilitate collusion among affiliates due to the highly sensitive information exchanged on prices, costs, discounts and quantities purchased. Moreover, retail chains involved in Centrale Italiana had multi-market contact at downstream level. The overlaps were considered very important in this case because they meant a reduction of incentives to compete in local markets.

The Italian Antitrust Authority considered that the RA was likely to produce anticompetitive effects both on the upstream and downstream markets. The possible restrictive effects on the supply markets (upstream) derived from the possession of strong purchasing power. Such power could lead to a reduction in the ability to compete for contractually weaker producers, with negative consequences in the medium term on the variety and quality of the products. On the local product distribution markets (downstream level), the agreement was deemed likely to produce negative effects in terms of coordination of sales policies or, at least, of strong reduction of incentives for reciprocal competition between affiliates. All these conditions led to a finding of a violation of Art. 101 of TFEU.

The parties individually submitted remedies in order to remove anticompetitive concerns. The main remedy was the termination of Centrale Italiana in 2015. In addition, the parties interrupted the collaboration agreements between Despar Servizi and Gartico with all the companies belonging to Centrale Italiana, including Coop Italia. A further remedy regarded the collaboration relationships between Sigma and Coopitalia and between Discoverde and Coop Italia, with exclusive reference to the activity of purchase negotiation, that was limited to some suppliers (no private label suppliers). This specific collaboration relationship was formalised through the stipulation of negotiation mandates, signed by Sigma and Discoverde, as principals, and Coop Italia as the mandated company.
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