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Competition Law Compliance Manual

1                This manual

Competition law prohibits certain types of anti-competitive conduct. This manual describes the conduct that will or can infringe competition law.

Given the complexity and dynamic evolution of competition law, this manual cannot give a detailed and exhaustive description of every kind of conduct that will infringe competition law. If, on the basis of this manual, you are in any doubt whether a commercial activity complies with competition law it is your responsibility to contact the Administration.

This manual divides conduct into two categories: “don’ts” and “asks”:

  • “don’ts” describe conduct that will generally be regarded as a serious infringement of competition law;
  • “asks” describe conduct that may infringe competition law, but may under certain conditions be legal. Such conduct must never be entered into without the approval of the Administration.

This manual is based on EU competition law (derived from the EC Treaty), which applies to all EEA Member States (i.e. the EU Member States plus Norway, Iceland and Liechtenstein). As the national competition laws of the EEA Member States largely correspond with EU competition law, this manual will in practice describe conduct that is, or may be, prohibited under these national competition laws. As a rule of thumb, compliance with EU competition law as described in this manual will usually ensure compliance with US law and other competition law regimes. Any particular differences under US law are noted in this manual.

This manual sets out general rules of conduct (section 4) and guidance on relations with competitors (section 5). Those rules and guidance must be followed in all countries where Borregaard does business and any deviation from those rules and guidance must be cleared with the Administration. Later sections of this manual provide guidance on licensing agreements (section 6), relations with customers (section 7), and relations with suppliers (section 8). As competition law regimes outside the EEA vary in their treatment of licensing agreements and relations with customers and suppliers, these rules should only be used as a guide in countries outside the EEA, and advice should be obtained from local counsel in co-operation with the Administration.

2                The risks of non-compliance

The consequences of infringing competition law can be very serious:

Conduct infringing competition law may be fined, and serious breaches may lead to substantial fines (for example, under EU law, up to 10% of worldwide group turnover). If one Borregaard company infringes competition law, the turnover of the whole Borregaard group may be relevant when setting the fine;

  • Borregaard may also be exposed to substantial damages claims from third parties (including treble damages claims in the US);
  • competition law cases generally attract a lot of public attention and may be very harmful for Borregaard’s reputation and business relationships;
  • due to the potential for serious harm to Borregaard, any failure to take proper care to comply with competition law will be considered a serious breach of your employment obligations;
  • in many European and other countries, including the US, criminal sanctions, including imprisonment, may be imposed against the individuals involved.

3                Basic concepts

3.1            What is “competition law”?

Competition law is based on the assumption that effective competition between firms creates incentives for them to outperform their rivals to the benefit of consumers. However, firms will always strive to optimise their profits and, from a commercial point of view, may view the elimination of competition as the best way of increasing their profits. To the extent that firms might increase their profits by “anti-competitive” behaviour, they would, in the absence of competition law, do exactly that. It is important to note therefore that competition law is designed to prevent certain kinds of (seemingly) commercially rational behaviour.

EU competition law sets out two general prohibitions against anti-competitive conduct:

  • Article 81 EC Treaty prohibits certain anti-competitive agreements between firms;
  • Article 82 EC Treaty prohibits the abuse of a dominant position in a market.
    • US competition law contains similar prohibitions.

Separate merger control rules apply to merger and acquisition transactions and some joint ventures. This manual does not deal with these rules, and advice from the Administration should be sought if Borregaard is contemplating a merger, takeover, the acquisition of parts or assets (including intellectual property rights) or shares of another company or a joint venture.

3.2            What is an “agreement”?

The prohibition of anti-competitive agreements applies to “agreements, decisions and concerted practices” (usually just referred to as “agreements”). The concept of an agreement in this context is very wide and covers not only written contracts, but also oral agreements, “gentlemen’s agreements” and subtle understandings as well as the exchange of commercially sensitive information. It does not, however, apply to agreements between companies within the Borregaard group.

It is important to note that all forms of contact with competitors may ultimately be viewed as an “agreement”. However, Borregaard is free to respond to initiatives launched by competitors in the market. Borregaard will not be in breach of competition law merely because it has arrived at a business strategy that is similar to a competitor’s, provided that Borregaard has decided on this strategy entirely independently of the competitor.

3.3            What is a “dominant position”?

It is not prohibited for a firm to have a dominant position in the market. Only abuse of a dominant position is prohibited. Dominant firms are allowed to compete for business on the basis of the strengths of what they offer. However, competition law places a special responsibility on dominant firms when competing in the market. As a consequence, conduct that is perfectly legal for non-dominant firms can be considered an abuse when implemented by dominant firms.

The starting point for the assessment of dominance is the firm’s market share in the relevant market. Although not determinative, the following thresholds provide a useful starting point when assessing dominance:

Below 25% dominance is highly unlikely.

Between 25% and 40% dominance is still unlikely, but cannot be ruled out.

If Borregaard has a market share between 25% and 40% and one of the following factors is present, you should assume that Borregaard has a dominant position, unless you have specific clearance from the Administration:

  • competitors’ market shares are significantly lower than Borregaard’s;
  • Borregaard’s market share has remained stable between 35% and 40% over the last three years;
  • there are barriers to entry or expansion in the market which make it especially costly or risky for competitors to challenge Borregaard’s market position, e.g. legal barriers, capacity constraints, high sunk costs, cost advantages that cannot be duplicated, privileged access to supply, intellectual property rights, a highly developed distribution network or strong brand names or reputation;
  • the buyers in the market are relatively weak or do not have significant buying power.

Between 40% and 50% there is a significant risk of dominance.

If there is a risk that Borregaard’s market share exceeds 40%, you should assume that Borregaard has a dominant position, unless you have specific clearance from the Administration.

Above 50% dominance will be presumed.

It is usually the dominant position of suppliers that raises competition concerns. However, buyers can also occupy dominant positions and potentially abuse buyer power.

US law has a similar concept (monopolization) to the concept of abuse of a dominant position.

3.4            What is a “relevant market” in relation to competition law?

The effects of an agreement, and the question of dominance and effect of conduct by a dominant firm on competition, must be considered in relation to the “relevant market”. To determine the relevant market one must define both:

  • a relevant product market that comprises any goods which are regarded by buyers as economically interchangeable (by way of example: consider whether Mercedes and Toyota cars are part of the same product market, or whether Coca-Cola falls within a product market comprising only cola drinks, a wider product market made up of all carbonated soft drinks or an even wider product market including all soft drinks); and
  • a geographic market in which the relevant competition takes place (by way of example: consider whether plumbing services are provided on a local, regional, national or Europe-wide geographic market).

Defining the relevant market for competition law purposes requires experience and knowledge of the methods and guidelines used by the courts and the competition authorities. Market definition should therefore be conducted in co-operation with the Administration.

3.5            What is the geographic scope of competition law?

Competition law generally applies to all agreements and conduct that have effect within a jurisdiction, regardless of whether the party in question is established within that jurisdiction or not. EU competition law generally applies to all agreements or actions that may affect competition and trade within the EEA. The national competition laws of the EEA Member States will generally apply (whether independently of or in addition to EU competition law) to conduct that has an effect in that EEA Member State. Conduct outside the US that affects US commerce may be subject to US competition law.

Certain countries, notably the US, are known for their aggressive assertion of jurisdiction, and there are a number of international treaties and agreements which allow for individuals to be extradited to face trial in another country for infringing competition law.

4                General rules of conduct

The following general rules of conduct are applicable to Borregaard employees in all circumstances:

Read this manual carefully and make sure it is implemented in your organisation. If any aspect of this manual is unclear to you, contact the Administration.

Ensure that all written documents (whether electronic or hard copy) which you prepare do not contain unnecessary exaggeration and do not give a misleading impression that competition law may have been breached, when this is not the case (for example, by using phrases such as “eliminating competition”). Be especially careful in your email communications.

Be generally very cautious in any communication with Borregaard’s competitors. Avoid any possible misunderstandings and, in the event that any inappropriate suggestion is made in an e-mail or in any other written communication, contact the Administration, do not try to destroy the evidence, but clarify that the suggestion is unacceptable and record both the suggestion and your answer.

Before attending any trade association meeting, conference, seminar or other meeting where Borregaard’s competitors will attend, consider the purpose and agenda of the meeting, whether Borregaard should be represented and, if so, by whom. Any Borregaard representative attending such an event must read this manual carefully beforehand.

If, in the course of any meeting with one or more competitors (or a trade association meeting), any inappropriate discussion takes place, state clearly that you will leave the room if the conversation continues. If the conversation does continue, leave the room immediately and ask that your departure is minuted.

Be aware that competition authorities have strong powers of investigation and enforcement, and can conduct unannounced searches of business (and, in some countries, residential) premises for evidence of any unlawful conduct. It is Borregaard’s policy to co-operate fully with any investigation conducted by a competition authority. Each business unit shall, in cooperation with Borregaard’s Administration, implement a dawn raid manual in case of inspections from the competition authorities.

Contact the Administration immediately if you suspect that Borregaard may have infringed competition law: the European and US authorities and a number of national authorities offer total or partial immunity from fines to firms that are the first to reveal unlawful behaviour.

Always contact the Administration if you suspect that another firm or firms (such as a competitor or supplier) may have infringed competition law. You do not want to be wrongly suspected of participating in a possible infringement; and it may be that the infringement is commercially harmful to Borregaard.

When contemplating a merger, acquisition or joint venture transaction, always contact the Administration at an early stage.

5                Relations with competitors

5.1            Don’ts

The following types of “hard-core” agreement will, by their nature, be viewed as restricting competition and are generally prohibited. Also prohibited are any arrangements which signal future intentions to a competitor with regard to any of the hard-core matters below. If you believe any of the hard-core matters listed below might be justified as part of a legitimate and broader business arrangement, you must ask the Administration before proceeding with it.

  • Price agreements and price fixing

Don’t enter into agreements with competitors in relation to the price to be charged to customers. This includes agreement as to any element of the price, including cost elements, margins, rebates and discounts, and material terms not expressly price-related, such as warranties.

  • Market sharing

Don’t enter into agreements with competitors to divide or allocate geographic markets, product markets or customers.

  • Coordinated tendering

Don’t coordinate behaviour with competitors in relation to tenders, for example, by agreeing with a competitor the terms that will be offered in a tender. Borregaard may only submit a joint tender with a competitor with the approval of the Administration.

Don’t agree with competitors not to respond to a call for tenders or to allocate tenders.

  • Agreements to limit production or capacity

Don’t agree with competitors to regulate or limit production or capacity. Although certain agreements to limit production may be permitted in industries with excess capacity or sharply falling demand, such agreements must always be cleared in advance by the Administration.

  • Agreements to exclude competitors

Don’t agree with competitors to actively exclude a competitor, for example, by entering into collective exclusive dealing arrangements or boycott schemes. Borregaard is allowed to compete for business on the basis of the strengths of what it offers, and the exit of a competitor from the market as a result of poor performance is not a competition law concern. However, any agreement to actively exclude a competitor will infringe competition law.

5.2            Asks

All agreements with competitors, including distribution agreements and a series of individual transactions forming a continuing commercial relationship, must be cleared in advance by the Administration. Although the following types of agreement might be permissible under competition law, this section indicates some of the factors that are likely to be relevant to the Administration’s assessment:

Note that in this context it is your responsibility to identify and inform the Administration of the competitive relationship between Borregaard and its contract parties.

  • Information exchange

Ask before exchanging information about Borregaard’s business activities with competitors. The Administration will generally have regard to the following factors:

the type of information: generally, any information that allows competitors to determine Borregaard’s future behaviour or vice versa must not be exchanged. This includes information about quantities of goods produced and sold, prices, cost structure, discounts, customers, plans to increase or reduce capacity etc.;

the source of the information: Borregaard is free to gather information in the market from independent third parties or publicly available information. Trade associations may collect and disseminate certain market information among their members. However, great care must be taken in relation to such information (see section 9 for more information);

the age and significance of the information: the exchange of historical or outdated information is not always prohibited, but great care should be taken to ensure that the data is genuinely historic or outdated and that there is a legitimate reason for the exchange.

  • Research and development agreements

Ask before entering into a research and development (R&D) agreement with a competitor. This may raise competition law concerns, in particular if any of the following are present in the agreement:

  • exclusivity clauses;
  • non-compete obligations;
  • territorial restrictions;
  • market or customer allocation;
  • restriction on a party’s access to the results of the R&D;
  • a duration of more than five years;
  • clauses regarding marketing and commercialisation of a final product.
    • Specialisation agreements and joint production agreements

Ask before entering into a specialisation agreement e.g. where firms A and B produce products X and Y respectively, but A agrees to cease the production of X and purchase X from B. This specialisation agreement would be “reciprocal” if B additionally agrees to cease the production of Y and purchase the product from A;

Ask before entering into a joint production agreement e.g. where two or more firms agree to produce certain products jointly.

Where the combined market share of the participating firms is less than 20% of the relevant market, a specialisation or joint production agreement will normally be approved by the Administration, provided that the agreement does not contain any clauses that:

  • fix the prices at which the products are sold to third parties;
  • limit output or sales; or
  • allocate markets or customers.
    • Commercialisation agreements

Ask before entering into an agreement with a competitor to jointly sell, distribute or promote products. Joint selling is generally prohibited, but more limited arrangements that only address one specific marketing function, such as physical distribution, service or advertising may be permitted.

  • Agreements on technical standards

Ask before agreeing with a competitor to create a new technical standard and before signing up to a new technical standard. Agreements on standards will in most cases not infringe competition law, provided that the standard-setting is based on non-discriminatory and open procedures where all firms have the possibility to be involved. However, certain standard-setting agreements will raise competition concerns, in particular agreements containing the following clauses:

  • clauses limiting firms’ freedom to deviate from the agreed standards;
  • clauses preventing firms from producing or marketing products that do not conform with the agreed standards, or preventing firms from developing their own independent standards;
  • standards that are framed so as to obstruct imports;
  • standards that incorporate an individual firm’s patented technology, especially if there is not a commitment to license the technology;
    • limitations on third party access to and implementation of the agreed standards.
    • Joint purchasing agreements

Ask before agreeing with a competitor to jointly purchase a particular product or service. The Administration will usually examine the market shares of Borregaard and the competitor on both the purchasing and selling markets, and any interdependencies between these markets. If the joint purchasing agreement contains any “hard-core” provisions (such as those listed in 5.1), it will be prohibited.

  • Competitors as customers

Ask before entering into a sale and purchase, supply or distribution agreement with a competitor. This includes a firm that is not currently, but has the potential to become, a competitor of Borregaard. The Administration will in particular examine whether the agreement:

  • is “stand-alone”, or forms part of a continuing commercial relationship;
  • is non-reciprocal in the sense that only one firm is buying and one firm is selling;
  • is based on normal market terms and conditions;
    • is genuinely motivated by commercial grounds with no connection to the competitive relationship between the firms (e.g. one firm is in short supply and the other has excess stock).
    • Interlocking directorships

Ask before serving as a director or officer of any competitor (or of any subsidiary or parent of a competitor), or designating any Borregaard employee or representative to serve as a director or officer of any competitor (or subsidiary or parent of any competitor).

  • Refusal to supply

Ask before refusing to supply a competitor on a downstream market if you think that Borregaard may have a dominant position in the market for the goods in question. Refusal to supply may amount to an abuse of a dominant position.

6                Licensing agreements (technology transfer agreements)

Ask before agreeing to license technology, whether this is with a competitor or a non-competitor. Where the parties’ combined market share is less than 20% (30% if the other party is not a competitor) of the relevant technology and product markets, a licensing agreement will usually be approved by the Administration, provided that the agreement does not contain any clauses that:

  • restrict either party’s ability to determine its prices when selling products to third parties;
  • limit output;
  • restrict the licensee's ability to exploit its own technology or prevents either of the parties to the agreement from carrying out research and development;
  • oblige the licensee to assign or give an exclusive licence in respect of severable improvements to or new applications of the licensed technology to the licensor (“grant-back clauses”);
    • prohibit the licensee from challenging the validity of the licensor’s intellectual property rights (“non-challenge clauses”).

7                Relations with customers

Borregaard’s relations with its customers may be based on stand-alone sales or longer term agreements. Generally, competition law doesn’t apply to stand-alone agreements with customers who are not Borregaard’s competitors. However, it may apply to longer term agreements e.g. where a customer or distributor agrees to buy Borregaard’s products on a regular basis.

The competitive effects of a supply or distribution agreement will often depend on Borregaard’s market position, although there are some important “don’ts” and “asks” below that apply irrespective of Borregaard’s market position (see sections 7.1 and 7.2). With the exception of the matters covered in sections 7.1 and 7.2, where Borregaard’s market share is less than 30% the agreement will to a large extent be exempt from competition law. However, where Borregaard’s market share exceeds 30%, or where Borregaard has a dominant position, there are some further “asks” which must be considered (see sections 7.3 and 7.4).

7.1            Don’ts

The following types of “hard-core” agreement will, by their nature, be viewed as restricting competition and are generally prohibited.

  • Resale price maintenance

Don’t impose restrictions on your customer’s resale price e.g. by setting the actual or minimum price at which the customer can resell the products (a recommended retail price is permitted, provided this is genuinely a recommendation and the customer is not pressured or incentivised to adopt the price).

  • Territorial restrictions

Don’t prevent your customer from reselling the products outside a defined territory in response to unsolicited orders (known as “passive sales”), including responses to general advertisements on the internet.

  • Selective distribution systems

Don’t impose anti-competitive conditions on authorised distributors where Borregaard operates a selective distribution system (i.e. where distributors are selected on the basis of specified criteria and they undertake not to sell goods or services to unauthorised distributors). This includes:

  • restricting authorised distributors’ ability to compete with one another;
    • restricting the end-users to whom authorised distributors may sell.

US law is more permissive in relation to the three topics listed above. Ask for guidance in relation to these issues in the US.

7.2            Asks – irrespective of Borregaard’s market share

The following agreements with customers must be cleared in advance by the Administration:

  • Exclusive purchasing

Ask before entering into a “non-compete obligation” or an exclusive purchasing agreement with a customer that lasts for more than five years, automatically renews beyond five years, or exceeds the period of supply. A “non-compete obligation” includes:

  • any kind of obligation that requires the customer not to manufacture, purchase, sell or resell competing goods or services;
    • a requirement that the customer purchase more than 80% of its total requirements of the contract goods or services from Borregaard.
    • Price reporting

Ask before imposing any requirement on customers to report to Borregaard prices offered by Borregaard’s competitors. This includes a clause in an agreement giving Borregaard a “right of first refusal”, where a customer is obliged to report back to Borregaard if they are offered lower prices by other firms.

  • Exclusive supply

Ask before Borregaard undertakes to sell to only one customer within all of the EU and/or EEA, if the customer in question has a market share of more than 30%.

7.3            (additional) Asks – where Borregaard’s market share exceeds 30%

  • Exclusive purchasing

Ask before entering into a “non-compete obligation” (as described at 7.2) or a requirement that the customer purchase all or more than 65% of its total requirements of the contract goods or services from Borregaard, irrespective of duration.

  • Exclusive distribution

Ask before granting exclusive distribution rights, e.g. in respect of specific products, customer groups or specific geographic areas.

 

  • Selective distribution systems

Ask before entering into selective distribution agreements.

  • US: tying/bundling

In the US, ask before making the customer’s purchase of one product conditional upon the purchase of another product, or making rebates or other conditions for the purchase of one product conditional upon the purchase of another product.

7.4            (Additional) Asks - where Borregaard has a dominant position

Where there is a risk that Borregaard has a dominant position on the market, any of the following agreements and arrangements with customers must be cleared in advance by the Administration:

  • Rebates

Ask before giving your customer rebates that cannot be justified on corresponding cost saving grounds, unless the rebates are genuinely unconditional (e.g. not linked to the volume purchased).

  • Pricing below cost

Ask before pricing a product below its full production costs or if you intend to launch a below-cost price campaign.

  • Price discrimination or other practices that discriminate between customers

Ask before giving comparable customers materially different price conditions or other contract conditions in comparable transactions.

  • Tying/bundling

Ask before making the customer’s purchase of one product conditional upon the purchase of another product, or making rebates or other conditions for the purchase of one product conditional upon the purchase of another product.

  • Minimum purchasing

Ask before agreeing with a customer to supply the majority (i.e. over 50%) of its total purchases of particular goods or services from Borregaard, and before taking steps to incentivise or induce a customer to obtain the majority of its purchases from Borregaard.

  • Refusal to supply

Ask before refusing to supply a customer, or discontinuing supplies to a customer, without a sound commercial basis for doing so (e.g. lack of creditworthiness).

7.5            Customers as competitors

Be aware that if an actual or potential customer is also a competitor section 5.2 will apply.

8                Relations with suppliers

Borregaard’s relations with its suppliers may be based on stand-alone purchases or longer term agreements. Generally, competition law doesn’t apply to stand-alone agreements with suppliers who are not Borregaard’s competitors. However, it may apply to longer term agreements e.g. where Borregaard agrees to purchase or distribute product from a supplier on a regular basis.

Generally, Borregaard’s relations with its suppliers will be subject to the same rules as for customers, described in chapter 7. When assessing relations with suppliers by way of chapter 7 it is, off course, necessary to read the text in light of the fact that Borregaard is the customer, thereby replacing “Borregaard” with “the supplier” and “the customer” with Borregaard.

8.1            Don’t

  • Interfering with suppliers’ dealings with Borregaard’s competitors

Don’t attempt to interfere with a supplier’s dealings with Borregaard’s competitors, for instance by requiring a supplier to refuse to deal with one of Borregaard’s competitors, or to give competitors of Borregaard less favourable terms.

8.2            Ask – irrespective of market share

  • Joint purchasing agreements

Ask before agreeing with a competitor to jointly purchase products or services from a supplier (see section 5.2).

8.3            (Additional) Asks – where Borregaard has a dominant position as a buyer

  • Abuse of buyer power

Ask before using Borregaard’s power as a buyer to force suppliers to sell products below cost.

  • Exclusive supply obligations

Ask before requiring a supplier to exclusively supply Borregaard with a particular goods or service.

  • Best terms

Ask before entering into an arrangement, which requires one of Borregaard’s suppliers to offer Borregaard at least as favourable (or better) terms as the supplier offers to any other customer.

9                Participation in trade associations and other fora

Participation in trade associations is not in itself prohibited. However, there are some important rules of conduct regarding Borregaard’s participation in trade associations. Careful consideration should be given to the by-laws and articles of association of any trade association of which Borregaard is a member, to ensure that these are compatible with competition law and this manual.

Trade associations can raise a number of competition law concerns, as competitors often come into contact with one another at trade association meetings. The rules of conduct outlined below apply equally to other fora where Borregaard is likely to come into contact with its competitors, including industry conferences, seminars and other similar events.

Before attending any trade association meeting, conference, seminar or other meeting where Borregaard’s competitors will attend, consider the purpose and agenda of the meeting, whether Borregaard should be represented and, if so, by whom. Any Borregaard representative attending such an event must read this manual carefully beforehand.

Great care should be taken that any contact with competitors in the context of a trade association does not result in any agreement or arrangement that infringes competition law (see generally section 5).

It is especially important that commercially sensitive information (for example relating to prices, orders, market opportunities) is not exchanged at trade association meetings, and is not collected and distributed by a trade association.

If any commercially sensitive issues come up in a trade association meeting, or in a more informal setting connected with the trade association, you must state that you will leave if the discussion continues. In the event that the discussion does continue, you must then leave, and request that your departure is minuted. This should then be reported to the Administration.

Always inform the Administration if you think that anything has taken place at a trade association meeting that may infringe competition law.