Introduction
The founding of purchasing groups is a widespread practice in many sectors, particularly in retail and industry. By joining forces with companies to jointly procure goods and services, cost savings and efficiency improvements can be achieved. By establishing a purchasing group, companies want to pool their purchasing power and thereby achieve cost savings and synergies. They therefore promote the turnover and market share of the companies involved and the economy in general. The legal issues related to the establishment of a purchasing group relate in particular to the permissible price fixing, the exchange of information, the joint market share and the bundling of market power, in particular the GWB (Act against Restraints of Competition) and European antitrust law in the form of the Horizontal Guidelines 2023.
legal basis
The limits set by the law, in particular the GWB and generally antitrust law set, in particular the horizontal guidelines in force since 21 July 2023, are of great importance when the purchasing group is entered into between competitors. In the area of antitrust law, purchasing groups are subject to competition rules. In particular, the horizontal guidelines relating to cooperation between competitors must be observed. It is important to understand that the members of a purchasing group are usually competing companies and the joint procurement of goods or services can potentially raise antitrust issues.
definition of a purchasing group
A purchasing group is an agreement between two or more independent companies, often competitors, that join forces to jointly procure goods, services or certificates. The aim is to benefit from the economies of scale, the reduction of transaction costs and the negotiation advantages that result from a larger procurement volume. The companies involved want to strengthen their market position in order to achieve a better negotiating position with suppliers. Typical examples of purchasing groups are retailers who jointly purchase products from suppliers or industrial companies that jointly procure raw materials or operating resources. Purchasing groups can occur in various sizes, from small medium-sized companies to large corporations. In terms of legal classification, purchasing groups are subject to a wide range of regulations in German antitrust law. In particular, the Act against Restraints of Competition (GWB) and the Federal Cartel Office's guidelines for the application of antitrust law to corporate mergers are of relevance. It is important to note that purchasing groups of all kinds exist and it depends on the specific circumstances of the individual case.
If the purchasing cooperation is limited to the German market because only purchasing and sales markets in Germany are affected, and the agreement on the establishment of a purchasing company is made between small and medium-sized enterprises (SMEs), the provisions of the GWB on medium-sized business cartels (Section 3 GWB) may be relevant. The GWB regulates the admissibility of a cartel between SMEs if the agreement demonstrably leads to rationalization effects for all SMEs involved.
Legal form and foundation
The choice of legal form is a crucial first step in establishing a purchasing group. In practice, purchasing groups are organized as a GmbH & Co. KG, a purchasing cooperative, a partnership under civil law, a GmbH or another purchasing company. It is also possible to appoint a joint representative to conduct negotiations with the suppliers. The choice of legal form depends on various factors, including flexibility, liability, tax considerations and the number of members.
In its guidelines on horizontal agreements, which also address purchasing agreements, the European Commission recommends concluding a written agreement that sets out the form, scope and functioning of their cooperation and allows for antitrust review. This applies not only to the social contract, but also for the cooperation agreement between the members of the purchasing group. It is therefore important to draw up clear legal documents such as a partnership agreement or statutes to regulate the organization and operation of the purchasing group. These documents should set out the objectives of the group, the duties and rights of the members, the decision-making structures and the distribution of costs and savings.
In order to decide on a particular legal form as members of the purchasing group, legal advice should be sought, in particular from a Specialist lawyer for commercial and corporate law, should be obtained.
antitrust compliance
The formation of a purchasing group can raise concerns under antitrust law, particularly with regard to distortions of competition and the abuse of market power. According to the law, in particular the GWB and the European Commission's horizontal guidelines, purchasing groups do not generally constitute a restriction of competition by object and do not raise concerns under antitrust law if they are actually only joint purchasing, i.e. if two or more buyers jointly negotiate and conclude an agreement with a specific supplier on the terms for the delivery of products to the cooperating buyers. As a rule, small and medium-sized enterprises (SMEs) will benefit from purchasing cooperations without risking a violation of the GWB because their individual and joint market share is usually not large enough to risk the formation of a cartel on the respective market. SMEs in particular should familiarize themselves with the advantages of a purchasing company and German and European antitrust law.
purchasing group vs purchasing cartel
The Horizontal Guidelines distinguish purchasing groups from purchasing cartels. Purchasing cartels are characterised by the fact that their object is a restriction of competition by object. Purchasing cartels are agreements or concerted practices between buyers of competitors,
(i) In which no joint negotiations are conducted with the supplier and
(ii) The future competitive behaviour of competitors is coordinated among themselves, in particular by agreeing on prices, quantities, quotas, or the allocation of customers and territories, or the behaviour of competitors towards the supplier is coordinated, in particular the price negotiation strategy or the exchange of sensitive business information which allows conclusions to be drawn about future pricing behaviour.
Competitors are not obliged to negotiate jointly with the supplier. However, if they negotiate separately, they may not make their respective purchasing decisions dependent on the behavior of competitors. In particular, competitors are not permitted to use buyers to determine prices, quantities, sources of supply or quality in advance.
Important aspects
In order to distinguish a purchasing group from a purchasing cartel that violates antitrust law, it is therefore important to consider the following antitrust law aspects:
transparency
If competitors make it clear to the respective supplier that they have formed a purchasing group and negotiations are being conducted for all members, this leads to transparency towards the supplier. It is not necessary that the identity of all competitors be disclosed. It is crucial that the purchasing group acts transparently and clearly documents its activities. This includes limiting its objectives and in principle opening itself up to potential members. Non-disclosure agreements or hidden exclusivity clauses, on the other hand, will raise antitrust concerns as they could restrict competition.
No creation or abuse of existing market power
The members of a purchasing group are required to examine the admissibility of their purchasing group and its scope under antitrust law themselves. In doing so, it is necessary that they include all the material, geographical purchasing and sales markets that the purchasing group can affect. If they are not competitors because they operate on different material and geographical markets, there is no threat of a restriction of competition. If the combined market share of the members of a purchasing group who are in competition with each other is always less than 15 percent on all the markets affected at the time of formation and during the course of its existence, it is likely in any case that an exemption from the ban on cartels can be successfully achieved according to the horizontal guidelines. The only exception to this is if there are agreements between the competitors that represent restrictions of competition by object.
efficiency improvement
Purchasing cooperation should demonstrably lead to an improvement in efficiency for all companies involved without unduly affecting competition. This can be achieved, for example, through economies of scale, cost reductions or quality improvements. Smaller companies often have to join forces in order to gain access to the products and delivery capacities of suppliers. Small and medium-sized enterprises (SMEs) do not have to accept that large competitors use their market power to push them out of sources of supply.
No exclusivity
The purchasing group must not abuse market power to disadvantage suppliers or other competitors or to exclude them from purchasing (horizontal boycott). Companies should ensure that they continue to act in a competitive manner. Exclusivity can be harmful under antitrust law. The members of the purchasing group must also have the opportunity to leave the purchasing group without unreasonable hurdles. The cooperation should not lead to the competitive structure of the market being significantly impaired.
Avoidance of restrictions of competition by object
The purchasing group must not enter into any agreements that hinder competition on the end customer market, such as price agreements, cost alignments, customer and territory allocations or volume allocations. This means that the cooperation should be limited to the purchasing process. Purchasing groups must be aware that there are antitrust risks if they do not meet the above requirements. If the cooperation leads to restrictions on competition, such as price fixing or market allocations, this can have serious antitrust consequences, including high fines for the companies involved.
The Federal Cartel Office and purchasing groups
By bundling purchasing activities, SMEs in particular can achieve significant cost advantages and thus strengthen their competitiveness. However, the formation of purchasing groups, as described, entails antitrust risks that are closely monitored by the Federal Cartel Office, the competent antitrust authority in Germany, in its decision-making practice. The Federal Cartel Office examines purchasing groups as part of its mandate to protect and promote competition in Germany.
If a purchasing group is to be regarded as a merger, it can be subject to merger control under the provisions of the GWB if each company exceeds a certain turnover. In addition, the purchasing group must gain control over one or more of its members or if it exercises considerable influence over the business policies of the members. In such cases, registration with the Federal Cartel Office is necessary. The authority examines whether the purchasing group can significantly hinder competition. This will generally not be relevant for small and medium-sized companies.
The decision-making practice of the Federal Cartel Office with regard to purchasing groups shows a gratifyingly differentiated approach. The authority has repeatedly stressed that purchasing groups are permissible under certain conditions and do not hinder competition. In practice, purchasing groups are generally only seen as problematic if they lead to significant market coverage or the creation of dominant positions and if they represent restrictions of competition by object.
The Federal Cartel Office has also made it clear that the antitrust assessment of purchasing groups always requires a case-by-case examination. The above-mentioned factors, such as the market position of the companies involved, the type of cooperation and its impact on competition, are taken into account. The Federal Cartel Office is generally in favor of cooperation, provided that the formation of a purchasing group demonstrably brings efficiency benefits for the companies and consumers.
liability issues, monitoring and compliance
Once the purchasing group has been established and is up and running, it is important to monitor it on an ongoing basis and to control market shares. The companies in the purchasing group should implement an effective compliance program to comply with antitrust law. This includes training for employees and regular monitoring to ensure that antitrust violations are avoided. The continued operation of a purchasing group in accordance with antitrust law requires that the companies involved comply with antitrust rules and regulations. It is essential that companies also seek legal advice on compliance measures in order to minimize antitrust risks.
In this context, the question of liability is also of great importance. In their own interest, the companies in the purchasing cooperative should ensure that they comply with antitrust law, as they will have to pay antitrust fines in the event of a violation of antitrust law. In addition, the members of the purchasing cooperative are advised to make clear agreements on the distribution of liability, particularly if legal disputes or financial difficulties arise. A liability limitation clause in the partnership agreement and cooperation agreement should therefore definitely be considered.
Conclusion
Purchasing groups are an important mechanism for achieving competitive advantages and strengthening the position of small and medium-sized enterprises (SMEs) on the market. However, in order to avoid antitrust problems, it is crucial that the establishment of a purchasing group is carried out in accordance with antitrust law. In particular, the horizontal guidelines for purchasing groups must be observed. The cooperation must be transparent, increase efficiency, facilitate market exit and free of restrictions on competition. Companies involved in purchasing groups should always seek professional legal advice to ensure that their agreements do not contain anti-competitive practices such as price fixing or market allocation.
The decision-making practice of the Federal Cartel Office shows that purchasing groups are permissible under the conditions mentioned, as long as they do not significantly hinder competition and demonstrably bring efficiency benefits. Companies that are involved in purchasing groups should therefore pay close attention to the antitrust regulations in order to avoid fines. Compliance with antitrust law, in particular the Horizontal Guidelines 2023, and the proper structuring of the business relationship are crucial to ensure the long-term success of the purchasing group and avoid legal problems.
