C 259/124
601.
EN
Official Journal of the European Union
21.7.2023
An agreement having no appreciable effect on competition Example 3 Situation: Fair-Clothing.Com is a very successful non-governmental organisation which, with the help of government subsidies and an effective media campaign, has been able to convince the large majority of firms selling clothing in the EU, including all of the main brands and a number of clothing retail chains, to only purchase clothing from producers in developing countries that respect certain minimum wage levels.
The campaign, which was widely supported by and coordinated with national and EU consumer organisations, has been a massive success: currently 85 % of all clothing sold in the EU is sold under the Fair Clothing label.
To obtain a licence to use the label, the participating firms have agreed to respect minimum wage standards and not to sell clothing which does not comply with the standards, wherever the clothing is produced.
As a result of the campaign, the wages of textile workers in developing countries have increased by on average 20 %.
Consumer product surveys and studies indicate that the average price of clothing in the EU has not increased appreciably as a result of the introduction of the Fair Clothing label: estimates for the effect on price range from – 0,5 % to + 0,8 % and are statistically not significantly different from zero.
The most credible explanations for the absence of a price increase are, first, the relative insignificance of production wages as a component of the end price of clothing products and, second, possible improvements in labour productivity that may be the result of the wage increase.
For instance, the wage component of producing cotton shirts is around 30 % of the local production costs.
The 20 % wage increase can thus be expected to have led to an increase of the price of the shirt ex-factory in the developing world of, at most, 6 %.
Analysis: Given that the parties to the Fair Clothing agreement (western brand owners and clothing retail chains) add an average margin of 200-300 % to the purchase price, to cover transport, import and other distribution and packaging costs, the effect on the price at which the parties sell the shirt is, already for this reason, at most 1,5-2 %.
Furthermore, there are indications that, by giving workers access to more nutritious food and better healthcare, the 20 % wage increase is having a positive effect on labour productivity in the textile sector in the developing world.
In view of the intense competition in the clothing sector, these productivity improvements can be expected to have a price-lowering effect.
Based on the estimates for the effect on price, it can be concluded that the Fair Clothing agreements are unlikely to have appreciable negative effects for customers of the parties to the agreements and are therefore not caught by Article 101(1).
602.
An agreement unlikely to restrict competition under Article 101(1) and/or likely to satisfy the condition under Article 101(3) Example 4 Situation: In response to the findings of research into the recommended levels of fat in certain processed food conducted by a government-funded think tank in a Member State, several major manufacturers of processed foods in that same Member State agree, through formal discussions at an industry trade association, to set recommended fat levels for the products.
Together, the parties represent 70 % of sales of the products within the Member State.
The parties’ initiative will be supported by a national advertising campaign funded by the think tank highlighting the dangers of a high fat content in processed foods.
Analysis: Although the fat levels are recommendations and therefore voluntary, as a result of the wide publicity resulting from the national advertising campaign, the recommended fat levels are likely to be implemented by all manufacturers of the processed foods in the Member State.
It is therefore likely to become a de facto maximum fat level in processed foods.
Consumer choice across the product markets could therefore be reduced.
However, the parties will be able to continue to compete with regard to a number of other characteristics of the products, such as price, product size, quality, taste, other nutritional and salt content, balance of ingredients, and branding.
Moreover, competition regarding the fat levels in the product offering may increase where parties seek to offer products with the lowest levels.
The agreement is therefore unlikely to give rise to restrictive effects on competition within the meaning of Article 101(1).
However, even if the agreement is found to have an appreciable negative effect on competition under Article 101(1) – because consumers are deprived of the choice of having high level fat food – the benefits for consumers in terms of value of information received and beneficial health effects are likely to outweigh the harm, and the agreement is likely to satisfy the conditions of Article 101(3).