In March 2018, I reported on the requirements set out by the German Federal Cartel Office (FCO) in order to create a competition law-compliant business-to-business (B2B) trading platform.
The FCO recently published a press release providing further insight into the issues that it focuses on when considering such compliance. The clarifications come after the FCO announced it had ‘no objections’ to the proposed launch of Unamera’s new agricultural product trading platform. Backed by three grain trading companies, this system is designed to facilitate the trading of grain and oil seeds between agricultural traders, farmers and processers.
In its most recent announcement, the FCO again acknowledged the potential trade efficiencies of online B2B trading platforms, such as giving customers access to a greater range of suppliers, simplifying transactions and order management, and reducing administrative costs. However, these benefits need to be considered against the concern that the platforms could facilitate the exchange of competitively sensitive information and therefore enable collusion.
Notably Andreas Mundt, President of the FCO, highlighted in the announcement the need for trading platforms to be non-discriminatory. This goes further than the requirements discussed in previous announcements, but there was no indication that this requirement applied only to companies or platforms with significant market power. Businesses will need to ensure that their platforms do not provide an unfair advantage to any market participants, including to themselves, via access to the data gathered and do not grant access to the platform in a non-discriminatory way.
German and EU competition laws only prohibit dominant companies from discriminating between market players in circumstances where this discrimination is capable of distorting competition in the relevant market. It therefore appears that the requirements listed by the FCO go beyond what is strictly necessary to comply with competition law at the inception of the platform.
However, the majority of trading platforms’ business models rely on high participation from both customers and suppliers. So the FCO may argue that it is appropriate to design the initial platform to be compliant with abuse of dominance laws, in anticipation of the dominant positions that these platforms seek to achieve.
Consistent with previous announcements, Mundt stated that whether a platform results in ‘an excess of transparency’ that could lead to price-fixing agreements is a key factor in their assessment. In light of this concern, Mundt noted that ‘particular focus is… always placed on the type and extent of information exchange, the creation of “Chinese walls” between the platform users, the publication of market statistics and the disclosure of the identity of the trading partners’.
Helpfully, the FCO has provided details of factors that have contributed to satisfying their requirements in each trading platform press release (ie in respect of the Unamera, ECEMENT and XOM Metals cases):
- Client login requirements: within the Unamera platform, in order to access the pricing information, participants must register with a client login. This requirement was similarly highlighted in the XOM Metals steel-trading platform case.
- Market statistics: only average prices will be disclosed by Unamera, which will be based on the aggregation of the data submitted by at least five independent companies. Interestingly, this appears to be less restrictive than in the ECEMENT case, where the FCO raised concerns regarding the initial proposal’s inclusion of region-specific benchmark pricing and price indexes. The Unamera announcement illustrates how the FCO will look at each platform proposal individually.
- Anonymous trading partners: initially, the identity of trading partners on the Unamera platform will be shown anonymously with the trading prices. Only at the final stage, immediately prior to the conclusion of the contract, will the identity of the contracting partner be revealed. Similarly, anonymous order requests were a feature of the ECEMENT platform.
The above factors show not only how businesses can satisfy the FCO’s competition concerns but also that there is no ‘one size fits all’ solution for B2B platforms. It will always be important to consider the specifics of the market that the platform is operating within.
The FCO also re-iterated the requirements from the previous XOM Metals steel trading platform case that it must be ensured that:
- ‘the trading platform continues to operate separately from partners in personnel, organisational, technical and information terms’; and
- ‘partners active in the same market may not exercise their general right to information and inspection… if such a restriction is necessary under competition law’.
I summarised in my previous blog post the alternative methods that businesses can use to implement these requirements.
The press release notes it is common practice for businesses to submit requests for assessment and clarification in relation to trading platform competition law issues to the FCO.
While the FCO is not obliged to conduct preliminary checks, the announcement indicates the FCO is willing to engage with companies on the complex competition issues surrounding B2Bs.
