The Danish Competition Appeals Tribunal remits the Danish Competition Council's decision in the "roofing felt case"

By assistant attorney Jeppe Mejer Kjelgaard

The "roofing felt case"

The case concerns the Danish Competition and Consumer Authority's investigation into the TOR instructions and the associated approval scheme, TOR Approved, which was a widespread quality standard within the roofing felt industry. 

The TOR instructions were adopted by TOR's board of representatives, which consists of 8–16 members representing different interests within the industry. The instructions had been prepared on the basis of suggestions from the Technical Committee, which solely consisted of representatives from the two roofing felt manufacturers Icopal and Nordic Waterproofing.  

In May 2017, the Competition Council arrived at a decision in the case. The Competition Council found that the TOR instructions had as their object to restrict competition by protecting the Danish roofing felt and foil market. According to the Competition Council, the standard was therefore contrary to the Danish Competition Act. 

The Competition Council also found that the alleged protective conduct was comparable to market sharing, which therefore, according to the Council, constituted so-called "hardcore" violation of the Danish Competition Act. Because of that conclusion, the Competition Council did not analyse in detail the legal and financial context and did not examine whether the scheme had had any anti-competitive effects. 

As part of the decision, the parties were ordered to abolish the TOR instructions and TOR Approved, which therefore no longer exist.

Industry standards are – generally – not anti-competitive

The Competition Appeals Tribunal consented to the general assumption in the Commission's guidelines that technical standards generally have no anti-competitive effects; on the contrary, they will normally have positive financial effects. 

The Competition Appeals Tribunal's comment was that a trade organisation's adoption of a standard will obviously always involve some kind of coordinated conduct, which is not necessarily per se detrimental to competition. The same applies to the parties' expected and legitimate adaptation of their products to the TOR instructions. Such adaptations are not per se comparable to unlawful restriction of the parties' product ranges. 

A standardisation agreement can therefore only be deemed to violate the Competition Act if there is sufficient proof that the standard is used as part of a broader agreement which, from an overall perspective, is suitable by its nature to restrict ordinary competition or has an anti-competitive effect.

Contrary to the Competition Council, the Competition Appeals Tribunal found that the TOR instructions per se were not sufficiently detrimental to competition to be deemed to have as their object to restrict competition. Hence, an analysis of the legal and financial context was considered necessary. 

In this connection the Competition Appeals Tribunal emphasized that the object of the TOR instructions – both at their drafting and subsequently – had been to ensure quality, and that the conduct of the parties was not comparable to real market sharing. Consequently, the Competition Appeals Tribunal remitted the case for reconsideration. 

Next steps in the case

As mentioned, the case has been remitted back to the Competition Council for renewed consideration and decision. The Competition Council's original decision is solely based on the "by object" criterion, so the Council has not made a "by effect" investigation, which the renewed consideration of the case may result in. However, based on the existing evidence, the Competition Appeals Tribunal has already commented on the anti-competitive effects which the TOR instructions may have:

"The Competition Appeals Tribunal [finds] that it has not been sufficiently proved that the primary intent behind the standards and/or TOR Approved was to protect the market from competitors or to reduce the product range, or that the standards were per se suitable for noticeably having (much less have had) such effect." 

The Competition Appeals Tribunal's decision shows that an extension of the limited category of agreements that have as their object to restrict competition will require a sufficient examination of the financial and legal context of the relevant agreements, which requirement the Competition Council had not fulfilled in this case. 

The necessity of such examination was also established by the Swedish decision concerning Alfa Quality Moving AB from November 2017. In this decision, the Swedish Patent and Market Court set aside the competition authorities' decision that a five-year non-competition clause had as its object to restrict competition. The reason was that the term of the clause exceeded the "safe harbour" period of three years. A period that has been determined in the Commission's notice on ancillary restrictions.

The Patent and Market Court therefore concluded that a non-competition clause cannot from one day to another become sufficiently detrimental to competition to be deemed to have as its object to restrict competition. According to the Swedish Court, such clause lies outside the category of "by object" agreements and must be assessed on the basis of the "by effect" criterion, unless the clause is ancillary. 

According to the press release issued by the Danish Competition and Consumer Authority, the Authority will now closely study the ruling and consider the next steps in the case. 

Nordic Waterproofing A/S was represented in the case by Morten Kofmann from Kromann Reumert.