SMEs in competition law: consortia

What?

For SMEs, cooperation among themselves is often the only way to compete with larger market players. The formation of consortia allows them to jointly prepare offers and participate in larger projects. However, consortia are tricky from an antitrust perspective because they have the potential to distort competition (even in a single project!). The problem is that cooperation, originally intended as a means to improve competitiveness and create efficiency gains, can easily be misused to manipulate prices, secure market share and exclude competitors. For example, if a group of contractors in a particular region team up for a challenging project, they have a virtual monopoly for the project and can dictate the price. A useful collaboration can quickly become an anti-competitive agreement.

When is a consortium permitted under competition law and when is it not?

A consortium is permitted under competition law if it promotes the competitiveness of the participating companies and does not unduly restrict competition.

Specifically, this means:

1. Necessity to participate in projects: A consortium is permissible if it is necessary for SMEs to be able to participate in projects that they could not handle alone.
2. No interference with key competition parameters: A consortium is not problematic if it does not affect essential competition parameters such as price, quantity, territory or customer.
3. Efficiency gains as justification: If a consortium leads to efficiency gains that could not be achieved without cooperation, it can also be justified.

However, a consortium is not permitted under the following circumstances:

1. Influence on competition parameters: An agreement that affects essential competition parameters without objective necessity is inadmissible.
2. Lack of efficiency gains: If a joint venture cannot be justified by clear efficiency gains, it is inadmissible as a cartel.
3. Submission cartels: Agreements that artificially inflate prices are particularly problematic.

So What?

Unfortunately, determining whether a joint venture is permissible is not easy, and violations can result in heavy fines, exclusion from public contracts and lasting damage to reputation.

Do What?

If the consortium does not clearly fulfil the above-mentioned requirements, the consortium partners should jointly clarify the risks under competition law. In most cases, it is advisable to also involve the customer in the relevant discussions, because the topic is also relevant to him!