© S.B.M. Hoffmann -- June 2011
Acknowledgements
It is a pleasure to thank those who made this thesis possible. I am particularly grateful to Professor
Pierre Larouche for his valuable comments and guidance throughout the whole writing process. I
would also like to make a special reference to my colleagues from the International and European
Public Law department, especially Raluca Deaconu, for their support and their useful suggestions.
This work has also been greatly facilitated thanks to the encouragements of my family.
Lastly, a very special thought goes to Karolin whom I could always find solace in.
i
ii
Abstract
In the (digital) economy of the 21st Century, customers benefit from better and easier access to
information regarding price, quality and originality of products on a given market. In order to meet
the needs of their customers, firms need to be very responsive and to adapt continually to an everevolving environment. Some companies seem to detect more effectively what will be the next
trends on a market and even act as trendsetters. Other firms simply try to follow these trends.
In order for the latter to be/remain efficient on a market, they need to get inspiration from other
companies' good practices. Providing this information is the aim of benchmarking, a management
technique used to measure the performance of one’s company against the best in the same or in
another industry in order to improve one’s processes.
Paramount to benchmarking is the access to relevant information stemming from a target company.
In that sense it will be subject to the scrutiny of competition authorities.
Confronting the most widely used benchmarking techniques with the European (hard and soft) law
on competition, this thesis aims at clarifying which information is not supposed to be shared among
competitors on a market and which techniques should not be deemed harmful to competition.
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Table of contents
ACKNOWLEDGEMENTS ............................................................................................................................................... i
ABSTRACT .................................................................................................................................................................... iii
INTRODUCTION ............................................................................................................................................................1
CHAPTER I: HOW DOES EU COMPETITION LAW UNDERSTAND EXCHANGES OF INFORMATION? 11
SECTION 1: INTRODUCTION TO THE NEW GUIDELINES ON HORIZONTAL COOPERATION AGREEMENTS ......................... 11
SECTION 2: MARKET CHARACTERISTICS THAT FAVOUR A COLLUSIVE OUTCOME STEMMING FROM AN INFORMATION
EXCHANGE AGREEMENT (ASSESSMENT UNDER ARTICLE 101(1) TFEU).............................................................................. 14
§1: Transparency.................................................................................................................................................................................... 15
§2: Concentration................................................................................................................................................................................... 15
§3: Complexity ......................................................................................................................................................................................... 16
§4: Stability of demand and supply conditions ........................................................................................................................ 17
§5: Symmetry ........................................................................................................................................................................................... 17
§6: Long-lasting commercial relationships ............................................................................................................................... 18
SECTION 3: CHARACTERISTICS OF THE INFORMATION EXCHANGE THAT FAVOUR A COLLUSIVE OUTCOME (ASSESSMENT
UNDER ARTICLE 101(1) TFEU) ................................................................................................................................................... 18
§1: Strategic nature of the information....................................................................................................................................... 19
§2: Market coverage ............................................................................................................................................................................. 21
§3: Individualization of the information ..................................................................................................................................... 22
§4: Age of the information ................................................................................................................................................................. 25
§5: Frequency of the information exchange .............................................................................................................................. 26
§6: Publicity of the information exchange and of the data thereof ................................................................................ 27
SECTION 4: CLEARANCE OF AN INFORMATION EXCHANGE AGREEMENT FOUND UNLAWFUL UNDER ARTICLE 101(1)
TFEU (ASSESSMENT UNDER 101(3) TFEU) ............................................................................................................................. 28
§1: Efficiency gains ................................................................................................................................................................................ 28
§2: Indispensability ............................................................................................................................................................................... 30
§3: Pass-on to consumers & non-elimination of competition ............................................................................................ 30
§4: Examples and summarizing tables......................................................................................................................................... 30
CHAPTER II: BENCHMARKING AS A MANAGERIAL TOOL THAT IS LIKELY TO BE SEEN CRITICALLY
BY LAWYERS ............................................................................................................................................................... 33
SECTION 1: WHAT IS BENCHMARKING? ....................................................................................................................................... 33
§1: Different kinds of benchmarking............................................................................................................................................. 34
A) Internal benchmarking ......................................................................................................................................................... 34
B) External benchmarking......................................................................................................................................................... 35
§2: The typical steps of a benchmarking exercise ................................................................................................................... 36
A) Determine which activities to benchmark (and how this will be done)...................................................... 36
v
1. Which activities? ................................................................................................................................................................................36
2. What benchmarking team? ...........................................................................................................................................................37
3. How to conduct the study? ............................................................................................................................................................38
B) Determine key factors to measure ........................................................................................................................... 40
C) Identify foremost practice companies .................................................................................................................... 40
1. Financial Results................................................................................................................................................................................41
2. Strategies ..............................................................................................................................................................................................42
3. Overall Business System ................................................................................................................................................................42
D) Measure performance of foremost practice companies and compare it to your own
performance ............................................................................................................................................................................ 43
1. Analysis of publicly available data ............................................................................................................................................44
2. Collection of data from discussion with informed persons............................................................................................44
3. Direct exchange of information with competitors .............................................................................................................44
4. Data analysis .......................................................................................................................................................................................45
E) Develop plan to meet and exceed or improve lead ........................................................................................... 45
F) Obtain commitment from management and employees................................................................................. 45
G) Implement plan and monitor results ...................................................................................................................... 45
H) Start over the whole process ..................................................................................................................................... 47
SECTION 2: HOW DOES BENCHMARKING RELATE TO EU COMPETITION LAW? .................................................................... 47
SECTION 3: WHY DO ECONOMISTS AND LAWYERS DISAGREE? ................................................................................................ 50
§1: Managerial viewpoint .................................................................................................................................................................. 50
§2: Legal viewpoint ............................................................................................................................................................................... 51
CHAPTER III: BENCHMARKING AS A PRO-COMPETITIVE TOOL THAT INCREASES COMPANIES'
ECONOMIC PERFORMANCE.................................................................................................................................... 55
SECTION 1: WHAT FEATURES OF A BENCHMARKING EXERCISE ARE LIKELY TO POSE PROBLEMS WITH REGARDS TO EU
COMPETITION LAW?........................................................................................................................................................................ 55
§1: Benchmarking needs strategic information ...................................................................................................................... 55
§2: Benchmarking is likely to rely on non-aggregated information .............................................................................. 56
§3: Benchmarking is only relevant with recent data ............................................................................................................ 56
§4: Benchmarking is conducted on a frequent basis ............................................................................................................. 57
§5: Benchmarking is not public ....................................................................................................................................................... 57
SECTION 2: RECONCILING BENCHMARKING AND COMPETITION LAW .................................................................................... 58
§1: Advice for firms ............................................................................................................................................................................... 58
§2: Advice for the Competition Authority ................................................................................................................................... 62
CONCLUSION ............................................................................................................................................................... 65
BIBLIOGRAPHY .......................................................................................................................................................... 67
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'As freak legislation, the antitrust laws stand alone. Nobody knows what it is they forbid'.
Isabel Paterson (unsourced)
The famous Canadian-American journalist and philosopher Isabel Paterson once stated her disbelief
in the soundness of the antitrust laws as a means to regulate the economic activity. We have to
acknowledge that this opinion was expressed by a person little known for her sympathy towards
State regulation (she was indeed one of the Founding Mothers of the American Libertarianism).
However this critic does make some sense if one thinks about certain aspects of European
Competition Law, especially its position vis-à-vis information exchanges in general and
benchmarking in particular. Before considering these issues, let us first briefly turn to the concept of
Competition Law.
Since 1 December 2009, two Treaties are in force in the European Union: the Treaty on European
Union (TEU) and the Treaty on the Functioning of the European Union (TFEU). The latter deals in
great detail with competition issues, i.e. the regulation of the exercise of market power by economic
operators.
Indeed, in order to ensure the completion of an Internal Market (formerly Common Market) with
free movement of people, goods, services and capital, and to safeguard consumer welfare attention
has to be given to companies' (or in the EU jargon undertakings) but also governments' behaviour
on the market. From this requirement we draw four main policy areas where EU Competition Law
applies:
− Cartels or any other form of collusion or anti-competitive practice (dealt with in article
101 TFEU)
− Abuse of a dominant position by an undertaking (dealt with in article 102 TFEU)
− Mergers and proposed acquisitions and joint-ventures (dealt with in the Council
regulation 139/2004 EC also known as the European Merger Control Regulation)
− State Aid, i.e. aid given by a Member State to companies within its jurisdiction (mainly
dealt with in article 107-108 TFEU).
1
This master thesis will focus on article 101 TFEU and discuss extensively the issue of information
exchange through the tool of benchmarking. Article 101 TFEU reads as follows:
1. The following shall be prohibited as incompatible with the internal market: all agreements
between undertakings, decisions by associations of undertakings and concerted practices which
may affect trade between Member States and which have as their object or effect the prevention,
restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have no
connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this article shall be automatically
void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings,
- any decision or category of decisions by associations of undertakings,
- any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to promoting
technical or economic progress, while allowing consumers a fair share of the resulting benefit,
and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the
attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a
substantial part of the products in question. (emphasis added)
Article 101 TFEU prohibits agreements between undertakings, decisions by associations of
2
undertakings or concerted practices which negatively affect competition on the market. The form of
these arrangements does not really matter. We can nevertheless distinguish between horizontal and
vertical cooperation agreements. Horizontal agreements concern 'dealings between parties at the
same level of the production and distribution chain'1 whereas vertical agreements are arrangements
'(…) reached between undertakings at different levels of the production and distribution chain'.2
The goals pursued by article 101 TFEU are not totally clear. It has often been assumed that
consumer welfare was the final objective of EU policy.3 Nevertheless, the creation of an Internal
Market without borders 4 or the protection of the structure of the market 5 have also got strong
support from the Court.
It should be noted that the application of EU Competition Law is triggered by the outcome of the
behaviour of an undertaking on the market. Hence, one does not need to prove the existence of a
specific (possibly written) agreement whose object would be to restrict competition in a market.
Similarly, the mere fact that an agreement does not foresee an explicit restriction of trade does not
render it legal per se. The Commission being only concerned with the actual effects of an
agreement, the well-known distinction between agreements having as their object or their effect a
restriction of trade within the Union is mainly one of form and procedure. Is the agreement
explicitly providing for a collusive outcome, it will have as its object a restriction of competition
and the Commission will not have to investigate its effects on the relevant market.6 Otherwise, the
Commission will have to conduct its own investigations.
From the foregoing it appears that concerted practices (or meetings of the minds) have the same
potential to harm competition as explicit agreements. In that sense, they are as much likely to be
caught under article 101 TFEU. Nonetheless, as noted by Van Gerven and Navarro Varona it is
much more difficult to detect them because it is particularly hard or even impossible to demonstrate
1 See PJ Slot and A Johnston, An Introduction To Competition Law (First Edition, Hart Publishing, 2006) p. 91.
2 Ibid
3 See for instance the 2004 Guidelines on the application of article 81(3) of the Treaty [now 101(3) TFEU], [2004] OJ
C-101/97 at para. 13: 'The objective of article 81 [now 101] is to protect competition on the market as a means of
enhancing consumer welfare and of ensuring an efficient allocation of resources. Competition and market
integration serve these ends since the creation and preservation of an open single market promotes an efficient
allocation of resources throughout the Community for the benefit of consumers'.
4 See for instance Cases C-56-58/64, Etablissements Consten SA & Grundig-Verkaufs-GmbH v Commission (Consten
& Grundig) [1966] ECR 299.
5 See Cases C-501, 513, 515 & 519/06 P, GlaxoSmithKline, at para. 61: '(…) article [101 TFEU] aims to protect not
only the interests of competitors or of consumers, but also the structure of the market and, in so doing,
competition as such'. (emphasis added)
6 See the Guidelines on art. 81(3) EC [now 101(3) TFEU], supra at 3, at para. 21: practices that ‘have such a high
potential of negative effects on competition that it is unnecessary (…) to demonstrate any actual effects on the
market’.
3
collusion from market data alone.7 The Commission thus has to focus on finding documentary
evidence of cooperation. In Thyssen Stahl AG v Commission, the European Court of Justice (ECJ)
discussed the nature of concerted practices under article 81(1) EC (now article 101(1) TFEU) in the
following terms:
82. The criteria of coordination and cooperation necessary for determining the existence of a
concerted practice, far from requiring an actual plan to have been worked out, are to be
understood in the light of the concept inherent in the provisions of the EC and ECSC Treaties on
competition, according to which each trader must determine independently the policy which it
intends to adopt on the common market and the conditions which he intends to offer to his
customers (...)
83. While it is true that the right of independence does not deprive traders of the right to adapt
intelligently to the existing or anticipated conduct of their competitors, it does, however, strictly
preclude any direct or indirect contact between such traders, the object or effect of which is
to create conditions of competition which do not correspond to the normal conditions of the
market in question, regard being had to the nature of the products or services offered, the size and
number of the undertakings and the volume of the said market (...)’ (emphasis added)8
More recently, the T-Mobile Netherlands B.V. case confirmed the strict approach already advocated
by the ECJ in Thyssen Stahl AG. The Court affirmed that even a one-time exchange of information
on future market conduct among competitors could amount to a concerted practice prohibited under
article 101 TFEU. 9 Moreover, it put it that there was no need to prove an actual restriction of
competition on the market to find a concerted practice. The underlying idea was that an information
exchange, capable of removing uncertainties relating to the future behaviour of competitors, could
be deemed anticompetitive for this reason alone.10
An efficient way for companies to coordinate behaviour is to maintain regular contact between
themselves. Through such contacts they will be able to exchange past, present and (possibly) future
7 See G van Gerven and E Navarro Varona, 'The Wood Pulp Case and the Future of Concerted Practices', CMLR 31,
1994, pp. 575-608.
8 See Case C-194/99, Thyssen Stahl AG v Commission [2003] ECR I-10821.
9 See Case C-8/08, T-Mobile Netherlands B.V. and Others v Raad van bestuur van de Nederlandse
Mededingingsautoriteit [ECR] I-4529 at para. 62.
10 Ibid, at para. 43.
4
sensitive data. 11 In a 2001 paper, Kühn gave the following definition of information exchange
agreements:
Information exchange agreements are arrangements between firms in which they exchange data
about the current state of the market or about past behaviour but not about future intended conduct.
(…) the information exchanged is based on actions or data that are in principle available and
verifiable for the parties.12
At first sight it would seem counter-productive to prohibit information exchanges in a market.
Indeed, the classical theory of perfect competition (from Adam Smith to Alfred Marshall)13 has put
great emphasis on free and immediate access of firms (and consumers) to information. Knowing all
parameters (input costs, labour...) within a market, economic actors are in a better position to take
rational decisions that will optimize their profits and eventually benefit consumers.14
The Danish government used this assumption when it decided to introduce a mechanism of frequent
publication of prices (firm-specific transaction prices for two grades of ready-mixed concrete) in
order for customers to know which firm had the best prices. This is known as the Danish readymixed concrete case.15 Unfortunately, the scheme did not work the way it should have and within a
short period of time (around 6 months), prices increased of about 20%. It seems that, thanks to the
new price publication mechanism, firms were able to infer their competitors' costs more easily.
Having increased their knowledge of market conditions, it was possible for firms to coordinate their
behaviours.
How to explain the gap between the policy expectations of the Danish government and the
outcomes of the scheme on the market? The answer lies in the representation one has of the market
at hand. Within a static model with only one (unlimited) period, a firm will lower its costs because
11 Ibid, at para. 43: 'An exchange of information between competitors is tainted with an anti-competitive object if the
exchange is capable of removing uncertainties concerning the intended conduct of the participating undertakings'.
12 See KU Kühn, 'Fighting collusion by regulating communication between firms', Economic Policy, April 2001,
p.187.
13 See GJ Stigler, 'Perfect Competition, Historically Contemplated' in Essays in the History of Economics (University
of Chicago Press, Chicago 1965).
14 See BR Henry, ‘Benchmarking and Antitrust’, Antitrust L.J. 62, 1993-1994, p.491: 'When buyers know the full
range of market opportunities, they can purchase from sellers with the lowest prices and force inefficient high-prices
sellers out of the market. When sellers are fully apprised of market factors, they can minimize their costs, adopt
innovative techniques, and lower prices to attract buyers on a competitive basis'.
15 For an extensive study of this case, see PB Overgaard and HP Møllgaard, 'Information Exchange, Market
Transparency and Dynamic Oligopoly', Economics Working Paper 2007-3, University of Aarhus, School of
Economics and Management, April 2007 and S Albæk, HP Møllgaard and PB Overgaard, 'Government-assisted
Oligopoly Coordination? A Concrete Case', The Journal of Industrial Economics, Vol. XLV, No. 4, December 1997.
5
perfect information being secured, it will immediately benefit from an increased amount of
costumers looking for some bargains. Simultaneously it will also trigger a price war for the benefit
of the consumers.16 Yet, market players are actually evolving in a dynamic environment. In that
sense, it could be said that interactions on a market occur in a repeated fashion, i.e. through a series
of periods or games. A price-cut in one period will still help a firm attract customers but will also
trigger retaliation (from competitors) in the following period. Moreover, there is an equilibrium
corresponding to each period. Thus, starting a price war is not desirable because it will only lead to
a new (and less profitable) equilibrium (or the forced exit from the market) in the next period. In the
example given, firms did not use the increased amount of information as an incentive to cut their
prices. Rather, gauging their competitors' costs, they came to an implicit agreement whereby a new
equilibrium at a higher price would benefit them all. Had one firm tried to cut its prices, it would
have faced retaliatory steps from its competitors, rendering such 'maverick' behaviour meaningless.
It has to be noted that not every piece of information proves useful when it comes to taking critical
business decisions (we will discuss this in greater detail in the first chapter of this thesis).
Nevertheless, the larger the amount of information exchanged between undertakings, the better they
will be able to understand a market that has become more transparent. In that respect, it has been
mentioned several times by the Commission that an increased market transparency (obtained
through information exchanges) would be detrimental to competition. In the Wood Pulp case it
stated that the market had been made artificially transparent17 simply by the fact that the prices
quoted by the firms to which this decision was addressed were made known so early.18 Moreover,
Kühn and Vives note that:
Normal competitive conditions are characterized according to the Commission by indirect
information transmission about prices through customers (…) information normally passes from
one producer to another in a multi-stage process: from the producer to his agent or subsidiary, from
the agent of subsidiary to the customer, from the customer to the agent of subsidiary of another
producer who is ultimately informed and then makes his own announcement.19
16 Such a model has been formulated by Sweezy as a 'kinked demand curve'.
17 KU Kühn and X Vives in 'Information Exchanges among Firms and their Impact on Competition', Office for
Official Publications for the European Community, Luxembourg, 1995 discuss and discard a benchmark of 'normal
transparency' by opposition to the 'artificial transparency' mentioned by the Court of Justice.
18 See Joined Cases C-89, 104, 114, 116, 117, 125, 126, 127, 128 and 129/85, Ahlström Osakeyhtiö and Others v
Commission (WoodPulp) [1993] ECR-I-1307 at para. 61.
19 See KU Kühn and X Vives, supra at 17, p. 78.
6
For this reason, information exchanges between competitors (through the means of ad hoc
agreements or not)20 are of the greatest interest for the Commission, as demonstrated for instance by
the UK Tractors Exchange case.21
This does not mean that all information exchange agreements will be deemed illegal per se, as these
can prove economically efficient. This is best demonstrated within the banking and insurance sector
where precise information about (potential) customers is shared among companies in order to
reduce the likelihood of information asymmetry and to eliminate the lock-in effect of customers not
daring to switch between companies because they do not want to lose the benefit conferred e.g. by
their long driving period without accident.
Even if the move towards a greater willingness to assess all beneficial effects stemming from
information sharing agreements is quite recent, it does not mean that the Commission has only
lately recognized the efficiency-enhancing effects of such arrangements. Indeed, as early as 1968
the Commission issued a Notice on Cooperation Agreements where it drew up a list of practices that
could be seen as beneficial and thus unlikely to infringe article 81(1) EC (now article 101(1)
TFEU). 22 This list included among others exchanges of opinion or experience, joint market
research, joint carrying out of comparative studies of enterprises or industries and joint preparation
of statistics and calculation models. The Commission defined its policy in a more detailed way in its
1978 Seventh Report on Competition Policy.23 Therein it insisted on the necessity to conduct a caseby-case analysis where the structure of the relevant market (oligopoly/ atomized market) and the
nature of the data exchanged (public/private, aggregated/individualized) would be essential factors
in reaching a decision. Thus, the Commission was already concerned with companies' own
information on prices, sales conditions, input and output whereas industry-wide data that amount to
statistics were seen as relatively harmless.
20 See the Guidelines on the application of Article 101 TFEU of the Treaty on the Functioning of the European Union
to horizontal co-operation agreements, [2011] OJ C-11/1, at para. 60:
'The criteria of coordination and cooperation necessary for determining the existence of a concerted practice, far
from requiring an actual plan to have been worked out, are to be understood in the light of the concept inherent in
the provisions of the Treaty on competition, according to which each company must determine independently the
policy which it intends to adopt on the internal market and the conditions which it intends to offer to its
customers'. (emphasis added)
21 We will discuss this case in the first chapter of this thesis.
22 See the Notice on Cooperation Agreements, [1968] JO C-75/3, [1968] CMLR D5.
23 See the Seventh Report on Competition Policy, Brussels-Luxembourg, April 1978.
7
In a 2004 paper, Nitsche and von Hinten-Reed identified a series of potential advantages stemming
from information sharing agreements. 24 Referring to the works of Christiansen and Caves who
investigated information exchanges relating to capacity expansion in the pulp and paper industry,25
they concluded that in certain cases investment decisions were less uncertain thanks to the use of
non-binding information exchange (or ‘cheap talk’) between competitors. As a result, economic
efficiency and ultimately global welfare was improved. Drawing on the seminal work of Kühn and
Vives,26 this paper further underlined other possible efficiency-enhancing effects. One of them is
output adjustment. According to the authors, quantity adjustment will benefit both producers and
consumers who will not have to bear producers' extra costs stemming from too high/too low
production. Another benefit is the lowering of search costs (as extensively explained by Georges
Stigler in his 1961 article on 'The Economics of Information').27
In Evans and Mellsop's 'Exchanging Price Information can be Efficient, Per Se Offences Should be
Legislated very Sparingly' (2003), we find another possible welfare-enhancing outcome of
information exchanges, namely the mitigation of the ‘winner's curse’. 28 29
Benchmarking is a tool used by undertakings to exchange information among themselves in an
efficiency-enhancing perspective. If it is praised by the business literature, it has been seen more
critically by lawyers. Let us now observe this practice in more details.
In order to meet the needs of their customers firms need to be very responsive and to adapt
continually to an evolving environment. Some companies seem to detect more effectively what will
be the next (business) trends on a market and even act as trendsetters. Other firms simply try to
follow these trends. In order for the latter to be/remain efficient on a market, they need to get
inspiration from other companies' good practices. At the same time, best-in-class companies want to
retain their competitive advantage by ameliorating their practices. Providing this information is the
aim of benchmarking.
24 See R Nitsche, N von Hinten-Reed, ‘Competitive Impacts of Information Exchange’, Charles River Associates,
2004.
25 See LR Christiansen, RE Caves, 'Cheap Talk and Investment Rivalry in the Pulp and Paper Industry', Journal of
Industrial Economics 45, No. 1, March 1997, pp. 47-53.
26 See KU Kühn and X Vives, supra at 17.
27 See GJ Stigler, 'The Economics of Information', The Journal of Political Economy 69, No. 3, June 1961, pp. 213225.
28 See L Evans, J Mellsop, 'Exchanging Price Information can be Efficient: Per Se Offences Should be Legislated very
Sparingly', Mimeo, Victoria University of Wellington, 2003.
29 In short, the winner's curse can be described as the phenomenon that leads the winner of a common value auction
with incomplete information to overpay for his good. Through information exchange this outcome will be less
likely.
8
Benchmarking can thus be described as '(...) the process of measuring the performance of one's
company against the best in the same or another industry'.30 '(...) the objectives of this exercise are
(1) to determine what and where improvements are called for, (2) how other firms achieve their
high performance levels, and (3) use this information to improve the firm's performance'.31
In that sense, benchmarking is the stereotype of an information-sharing agreement with a high
efficiency-enhancing potential. Yet, it poses a challenge to the competition authority because of the
risks it entails.
In this thesis, we will carefully examine the benchmarking methodology in order to see how it fits
within the competition provisions of EU Law (in particular the 2010 Guidelines on Horizontal
Cooperation Agreements). Our aim will be to assess the potential for reconciliation between these
two conflicting items in order to profit from both a high level of competition in the market and the
benefits stemming from the sharing of best business practices.
In that respect, our first chapter will be dedicated to a thorough analysis of the latest developments
on information sharing within the EU. We will then review the benchmarking practice and pinpoint
the features that could potentially breach EU Law. Finally, we will try to reconcile the EU policy on
information sharing and the benchmarking tool by suggesting guidelines for benchmarking staffs
and arrangements for policy-makers.
30 See Stevenson, 1996, quoted by WM Lankford in 'Benchmarking: understanding the basics', The Coastal Business
Journal 1, Number 1, p 57.
31 Source: <http://www.businessdictionary.com/definition/benchmarking.html>, accessed 3 April 2011.
9
10
Chapter I
How does EU Competition Law understand exchanges of information?
Section 1: Introduction to the new Guidelines on Horizontal Cooperation Agreements
Because they have the potential to lessen competition in a market by acting as concerted practices
allowing competitors to align their behaviours, information exchange agreements are under the
Commission's scrutiny. It nevertheless does want to distinguish between genuine efficiencyenhancing agreements and collusive covenants in disguise.
This care is best demonstrated by the newly issued Guidelines on the applicability of article 101
TFEU to horizontal cooperation agreements of 14 December 2010 (‘the Guidelines’).32 Whereas
the previous version33 was not even concerned with information exchange and did not mention the
term “benchmarking”, 34 the current Guidelines devote thirteen pages to this issue and the word
‘benchmark/ing’ is mentioned 5 times throughout the whole document.
In the light of this soft law instrument 35 what is then the current policy regarding information
exchanges within the European Union?
To begin with, it is worth mentioning the ambits of the Commission. In the introduction, it is thus
stated that the Guidelines will apply to all sorts of cooperation agreements of 'a horizontal nature',
regardless of the fact that these may be entered into by competitors or by non-competitors. As an
example of non-competitors, the Commission mentions '(...) two companies active in the same
32 Commission, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union
to horizontal co-operation agreements, [2011] OJ C-11/1.
33 Commission, Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements,
[2001] OJ C-3/2.
34 The Commission had nevertheless addressed this issue in a 2006 Information Note, ‘Issues raised in discussion with
the carrier industry in relation to the forthcoming Commission Guidelines on the application of competition rules to
maritime transport services’. However its scope was much narrower than what is been dealt with in the new 2010
Guidelines. Yet, one can there discern the basis for the current Guidelines. Indeed the Commission stated its
intention to look at the nature and type of information exchanged, the level of aggregation of the information, the
period to which it relates, the frequency of exchange and the delay of release of the data.
35 Together with other like-instruments Guidelines are “soft law” in the sense that they give guidance but do not bind
the ECJ in its appreciation of a case.
11
product market but in different geographic markets without being potential competitors'. 36 It
develops by stating the potential danger of such agreements:
The potential effect of such agreements may be the loss of competition between the parties to the
agreement. Competitors can also benefit from the reduction of competitive pressure that results from
the agreement and may therefore find it profitable to increase their prices. The reduction in those
competitive constraints may lead to price increases in the relevant market (…)37
The Commission then pinpoints two possible outcomes of a horizontal cooperation agreement, the
first relating explicitly to information exchange agreements:
A horizontal co-operation agreement may also:
−
lead to the disclosure of strategic information thereby increasing the likelihood of
coordination among the parties within or outside the field of co-operation' 38 (emphasis
added)
Part 2 of the Guidelines then goes into more details on information exchanges, that it divides into
two categories: i.e. 'data (…) directly shared between competitors' and 'data shared indirectly
through a common agency (like a trade association) or a third party such as a market research
organisation of through the companies' suppliers or retailers'.39
Subpart 2 is concerned with the assessment of information exchanges under article 101(1) TFEU.
Basically, we can observe two possible threatening outcomes pertaining to the aforementioned
agreements.
The first one relates to a collusive outcome. Thanks to the (strategic) information they have
exchanged, firms active in a market will be able to better understand their competitors' economic
situation and possibly (better) predict their behaviour in the near future. Coordination appears (the
Guidelines speak about alignment) and this logically leads to restrictive effects on competition.
36
37
38
39
See the 2010 Guidelines, supra at 32, at para. 1.
Ibid, at para. 34.
Ibid, at para. 35.
Ibid, at para. 55.
12
Information exchanges are often referred to as ‘facilitating practices’. In a 2004 paper Donatella
Porrini defines them in the following terms:
We can define as facilitating, various practices like information exchanges that try to limit the
influence of factors that destabilize co-operative outcomes and enhance the factors that support cooperative outcomes. So, even if information-sharing in itself is not a restriction on competition, the
competition authorities can concentrate on detecting specific information exchanges in their role of
40
sustaining explicit and tacit collusion.
Collusion can occur through different channels. Through information exchange companies can
'reach a common understanding of the terms of coordination',41 what in turns will 'create mutually
consistent expectations regarding the uncertainties present in the market'.42 In brief, 'exchange of
information about intentions concerning future conduct is the most likely means to enable
companies to reach such a common understanding'.43 Moreover, information exchange is likely to
reinforce the stability of a possible existing cartel by 'enabling the companies involved to monitor
deviations' 44 more easily. This is made possible after the market has become more transparent
thanks to the better understanding companies have of each other's behaviour. Finally, an increased
transparency in the market will also allow colluding companies to detect firms that are willing to
enter the market and to prevent them from doing so.
The second concern is about anti-competitive foreclosure. Let us imagine that we have an
information exchange agreement entered into only by a few (possibly dominant) firms in the
market. The remaining firms that do not benefit from an increased amount of information will then
be placed at a comparative disadvantage. Logically, such an outcome can only be foreseen 'if the
information concerned is very strategic for competition and covers a significant part of the relevant
market'.45
40 See D Porrini, 'Information Exchange as Collusive Behaviour: Evidence from an Antitrust Intervention in the Italian
Insurance Market', The Geneva Papers on Risk and Insurance 29, No. 2, April 2004, pp. 219-233.
41 See the 2010 Guidelines, supra at 32, at para. 66.
42 Ibid.
43 Ibid.
44 Ibid, at para. 67.
45 Ibid, at para. 70.
13
The Guidelines then go on by assessing the likelihood of competition concerns taking into account
the structure of the market at hand and the characteristics of the information exchange mechanism.46
Section 2: Market characteristics that favour a collusive outcome stemming from an
information exchange agreement (assessment under article 101(1) TFEU)
Let us first look at the market characteristics. Paragraph 77 states that:
(…) companies are more likely to achieve a collusive outcome in markets which are sufficiently
transparent, concentrated, non-complex, stable and symmetric. In those types of markets companies
can reach a common understanding on the terms of coordination and successfully monitor and
punish deviations (...)'
The fact that a market does not fulfil these conditions does not mean that no collusive outcome will
ever appear in it. In that sense, the Guidelines emphasize that 'a collusive outcome [can also be
achieved] in other market situations where they [note: the companies] would not be able to do so in
the absence of the information exchange'. 47 Thus 'the competitive outcome of an information
exchange depends not only on the initial characteristics of the market in which it takes place (such
as concentration, transparency, stability, complexity, etc.) but also on how the type of the
information exchanged may change those characteristics'.48 We will see this aspect in Section 3.
A last point has to be made before assessing market characteristics: information exchanges between
firms that are not direct competitors will not raise (major) antitrust concerns. The only risky
situation would be that of an information exchange between a supplier and its dealers. This would
however be dealt with under the Guidelines on Vertical Cooperation Agreements
46 This is in line with the previous case law of the ECJ in Case C-238/05, Asnef-Equifax, Servicios de Información
sobre Solvencia y Crédito, SL v Asociación de Usuarios de Servicios Bancarios (Ausbanc) [2006] ECR I-11125, at
para. 54: 'Accordingly (...) the compatibility of an information exchange system (...) with the [EU] competition rules
cannot be assessed in the abstract. It depends on the economic conditions on the relevant markets and on the specific
characteristics of the system concerned, such as, in particular, its purpose and the conditions of access to it and
participation in it, as well as the type of information exchanged—be that, for example, public or confidential,
aggregated or detailed, historical or current—the periodicity of such information and its importance for the fixing of
prices, volumes or conditions of service'.
47 See the 2010 Guidelines, supra at 32, at para. 77.
48 Ibid.
14
§1: Transparency
Transparency and concentration of a market are factors that are intuitively felt as being potentially a
threat for competition. We already mentioned the relevance of market transparency as a means to
monitor possible deviations and attempts of new firms to enter the cartelized market.49
§2: Concentration
Concentration is closely related to transparency. The Guidelines mention that 'tight oligopolies can
facilitate collusive outcomes on the market as it is easier for fewer companies to reach a common
understanding of the terms of coordination and to monitor deviations'.50
With more firms acting in the market, we are going towards an atomized structure of the market, i.e.
each firm's market share is decreasing. Whereas an information exchange within an oligopoly
allows for an easier identification of each firm's behaviour, this cannot be done within an atomized
market. Hence, a firm's deviation from the cartel (e.g. by undercutting its prices) will not be easily
detected, rendering deviation even more profitable. Moreover, as mentioned by the Guidelines
'gains from the collusive outcome are smaller because, where there are more companies, the share
of the rents from the collusive outcome declines'.51
This can be seen in the UK Tractors case52. This landmark suit, the first that was brought by the
Commission against an information sharing agreement alone (no collusion had been demonstrated),
shows that within a small and stagnant market, with high concentration (the four biggest firms had a
combined market share of about 80%), high barriers to entry and high customer loyalty, information
that would otherwise seem inoffensive turns into particularly valuable data. In the words of the
Commission:
The exchange restricts competition because it creates a degree of market transparency between the
suppliers in a highly concentrated market which is likely to destroy what hidden competition there
remains between the suppliers in that market on account of the risk and ease of exposure of
independent competitive action. In this highly concentrated market, ‘hidden competition’ is
essentially that element of uncertainty and secrecy between the main suppliers regarding market
49 See also J Green and R Porter, 'Non-cooperative collusion under imperfect price information', Econometrica 52, No.
1, 1984, pp. 87-100.
50 See the 2010 Guidelines, supra at 32, at para. 79.
51 Ibid.
52 See UK Agricultural Tractor Registration Exchange [1992] OJ L 68/19; [1993] 4 CMLR 358. Confirmed by the
General Court and the Court of Justice: see case T-35/92 J Deere v. Commission [1994] ECR II-957.
15
conditions without which one of them has the necessary scope of action to compete efficiently.
Uncertainty and secrecy between suppliers is a vital element of competition in this kind of market
(emphasis added).
Albeit theoretically well founded, the Guidelines' outcomes are of little help when it comes to
policy implications. Indeed, how to assess if collusion is likely or unlikely to appear within a given
market structure? Are there any figures available?
Apparently, this (fairly practical) question has attracted little attention from game-theory
economists, probably because it implies an analysis within a static environment, which renders it ill
fitted for actual (dynamic) market conditions. In a 1973 article, Selten explains that the number of
firms will be critical if it is between four and six.53 With four or less firms in the market the
likelihood of collusion will reach its maximum, whereas with six or more firms, it will quickly
decrease to its minimum. According to Sherer and Ross the minimum could be reach with a number
of ten to twelve firms in the market. 54 Even if it looks appealing, this model has to be used with
care. In fact, it presupposes a situation where firms agree to cooperate without trying to cheat
(Pepperkorn speaks of a 'cooperative game with enforceable agreements'). 55 Again, this is hardly
the case in the real world where strategies is highly volatile.
§3: Complexity
Complexity of the market is also a relevant factor when assessing the collusive outcomes of an
information exchange agreement. In order for firms to agree on prices or collusive conditions, i.e. to
propose similar sales conditions to potential buyers, they first need to produce similar products. You
cannot create a cartel in the automobile industry and propose the same price for city cars and SUVs.
Hence, in a complex market structure with high product differentiation, collusive outcomes seem
unlikely to appear. The Guidelines nevertheless foresee a situation where firms, instead of
exchanging information about a wide range of products and prices, simply agree on some basic
53 See R Selten, 'A simple model of imperfect competition where four are few and six are many', International Journal
of game Theory 2, 1973, pp. 141-201.
This article is mentioned by L Peeperkorn in 'Competition Policy Implications from Game Theory: an Evaluation of
the Commission's Policy on Information Exchange'. Paper presented at the CEPR/European University Institute
Workshop on Recent Developments in the Design and Implementation of Competition Policy, Florence, 29
November 1996. Peeperkorn also mentions two works of L Phlips, Competition Policy: a game-Theoretic
Perspective (CUP, Cambridge, 1995) and 'On the Detection of Collusion and Predation', European Economic
Review 40, pp. 495-510.
54 See FM Sherer and D Ross, Industrial Market Structure and Economic Performance (Third Edition, Houghton
Mifflin Company, Boston, 1990).
55 See L Pepperkorn, supra at 53.
16
pricing rules like pricing points. This would certainly be a concern for DG Comp.
§4: Stability of demand and supply conditions
As the Guidelines mention: 'in an unstable environment it may be difficult for a company to know
whether its lost sales are due to an overall low level of demand [note: for instance because of the
introduction of a new technology] or due to a competitor offering particularly low prices. Therefore
it is difficult to sustain a collusive outcome'.56 Because innovation is often brought by outsiders,
erecting significant barriers to entry 'would make it more likely that a collusive outcome on the
market is feasible and sustainable'.57
In the case of a dynamic market driven by innovation, homogeneity of products is hard to achieve
(and it is certainly not what companies are aiming at). By introducing a new item on the market
(thanks to a technological leap) a company may be wanting to reduce the price of its older range of
products, possibly to target new customers. However, when confronted to lost sales competitors will
find it hard to analyse the rationale behind them, as they could be explained both by a price cut or
the new technology.
§5: Symmetry
Paragraph 82 of the Guidelines goes on with the criteria of symmetry:
(…) a collusive outcome is more likely in symmetric market structures. When companies are
homogeneous in terms of their costs, demand, market shares, product range, capacities, etc., they are
more likely to reach a common understanding on the terms of coordination because their incentives
are more aligned.
However, one cannot rule out that through information exchange, firms will be able to (better)
accommodate their differences. Related to this is the nature of the goods present in the market. If
these are substitutes (an increased demand for one good would decrease demand for the other), the
collusive outcome of an agreement will not be the same than if goods are complements (an
increased demand for one good would increase demand for the other).
56 See the 2010 Guidelines, supra at 32, at para. 81.
57 Ibid.
17
§6: Long-lasting commercial relationships
Finally, a collusive outcome is more likely to happen when firms maintain long-lasting commercial
relationships and 'continue to operate in the same market for a long time'.58 A company will be less
willing to deviate for a cartel behaviour if it knows that the gain it will derive from the deviation at
a certain point of time will not outbalance the future losses resulting from its price cut and the
retaliation from the remaining colluding firms. This once more highlights the importance of a
credible and prompt retaliation mechanism in order to sustain collusion. The Guidelines state that
'the credibility of the deterrence mechanism also depends on whether the other coordinating
companies have an incentive to retaliate, determined by their short-term losses from triggering a
price war versus their potential long-term gain in case they induce a return to a collusive
outcome'.59
Section 3: Characteristics of the information exchange that favour a collusive outcome
(assessment under article 101(1) TFEU)
Having in mind the characteristics of a market that would facilitate collusion, let us now look at the
characteristics of the information exchange itself. Paragraph 86 to 94 of the Guidelines underline
seven relevant factors that have to be taken into consideration: the strategic nature of the
information, the coverage of the market, the individualization of the data, the age of the data, the
frequency of the information exchange, the publicity of the information and finally the publicity of
the information exchange.
First, it should be recalled that information is a “catch-all” term, that refers to a host of different
sub-categories. According to the New Oxford American Dictionary, it can be described as 'facts
provided or learned about something or someone'. Thus, as with all facts (or data in our case), some
will finally prove useful and some not. Information can then be divided into two categories:
strategic (or business-relevant) information and non-strategic (thus inoffensive) information.
58 Ibid, at para. 84.
59 Ibid.
18
§1: Strategic nature of the information
The Commission understands strategic information as 'data that reduces strategic uncertainty in the
market'.60 It can be related to prices (plus discounts or price evolution),61 customer lists, production
costs, quantities, turnover, sales, capacities, qualities, marketing plans, risks, investments,
technologies and R&D programmes. The Re Cimbel case62 shows that strategic information is not
only related to prices. In this case the Commission condemned an information exchange agreement
on projected increases in industrial capacities. The result of such information sharing was that a
firm could not take benefit of a sudden increase in demand by intelligently adapting its capacities to
it and thus growing accordingly. All firms being able to respond simultaneously to such increases in
demand, the relative market shares would stay the same, thus triggering a status quo or collusion. In
the same fashion the Commission condemned the obligation to inform rivals of investment plans
(Zinc Producer Group case).63
The Commission was also concerned with the nature of the information actually exchanged in the
aforementioned UK Tractors case.64
The information exchange scheme provided for the sharing of sales volumes of manufacturers and
importers of agricultural tractors in the United Kingdom. Information was highly detailed and
comprised the 'distributor's name and address, the tractor's serial number, the exact sales volume
and the market share by model and horsepower category, at national, regional and county level'.65
Kühn mentions that 'given the size of the postal code area this information allows the firms in the
industry to identify almost all individual tractor sales'. 66 One of the firms taking part in the
agreement argued that in addition to some efficiency gains (with regards to the processing of
possible warranty claims and the monitoring of the performance of sales personnel), the scheme
could not harm competition because it related to past conducts. Kühn disagrees with this argument
and emphasizes the relevance of this specific information within the market for tractors in the UK.
60 Ibid at para. 86.
61 In VNP/COBELPA, OJ [1977] L-242/10, [1973] 2 CMLR D28; the ECJ states that information becomes particularly
strategic (and hence should not be exchanged) when it is 'usually kept strictly confidential'.
62 See Re Cimbel, OJ [1972] L-303/24, [1973] CMLR D167.
63 See Zinc Producer Group, OJ [1984] L-220/27, [1985] 2 CMLR 108.
64 Supra at 52.
65 See John Deere Ltd v. Commission, T-35/92 [1994] ECR II-957 at para. 14-21.
66 See K-U Kühn, 'Fighting collusion by regulating communication between firms', Economic Policy, April 2001, p
194.
19
He writes that firms are willing to organize bidding rings and that 'the identification of individual
tractor sales is under such circumstances exactly the type of information that the firms would like to
have to organize such bidding rings'. 67 The conclusion of the Commission is therefore not
surprising: 'own company data and aggregate industry data are sufficient to operate in the
agricultural tractor market'.68
Thus, information about prices, quantities, costs, 69 business planning, wages 70 and demands is
particularly strategic for undertakings and it will be reviewed carefully and critically by DG
Comp.71
In a 2006 article Whish discusses the impact of the nature of the information exchanged on
competition within a market.72 He mentions the Re VNP and COBELPA case:
(…) whilst it is permissible to exchange general statistical information which could give a picture of
aggregated sales and output in an industry without identifying individual companies, it would be
contrary to article 81(1) EC for firms to provide competitors with detailed information about matters
which would normally be regarded as confidential.73
In a 2004 article: ‘Competitive Impacts of Information Exchange’, Nitsche and von Hinten-Reed
discuss the per se interdiction of the exchange of individualized pricing and quantity data.
Mentioning recent case studies on collusive arrangements, they write that '(...) effective collusion
requires agreement and monitoring or much more than just the ‘price' or the 'quantity'’.74 Thus it
may well be possible to allow information exchange on a price or a quantity if further details are not
67 See K-U Kühn, supra at 66, p. 194.
68 See UK Agricultural Tractor Registration Exchange, supra at 52, at para. 62.
69 As argued by BR Henry, supra at 14, p. 498: 'Costs are directly related to the ultimate price of a product or service
and the exchange of such information (whether based on past, current or projected future costs) might lead to price
stabilization'.
70 Wages, like other discrete costs, contribute (to a great extent) to the total cost structure. Sharing such information
may lead to an accepted 'standard' wage level that would not foster competitive efforts to attract best personal.
71 The US Supreme Court also sees with a wary eye agreements that lead to exchanges of price information.
See for instance United States v Container Corp., 393 US 333 (1969) at para. 337 where the Court stated that: ‘The
exchange of price data tends towards price uniformity (…) Stabilizing them as well as raising them is within the ban
of section 1 of the Sherman Act (...)'.
72 See R Whish, 'Information agreements' in Konkurrensverket (Swedish Competition Authority), 'The Pros and Cons
of Information Sharing' (Stockholm, 2006).
73 Ibid, p. 31.
74 See R Nitsche and N von Hinten-Reed, supra at 24, pp. 5-6.
20
exchanged'.75
Evans and Mellsop even argue that in certain cases welfare-enhancing effects can flow from an
exchange of price information. 76 Referring to the New-Zealand market for meatpacking where
producers are facing uncertainty about the weekly supply of livestock at any given price and the
price they will finally receive for the processed product, they demonstrate that exchanging data on
prices seemed the best solution to reach an optimal outcome for all the parties concerned. They
conclude that in this specific case the object of the meetings was not to agree on a maximum
transaction price but rather on a minimum transaction price. These information exchanges seemed
to be needed in order to mitigate the winner's curse that was associated with the transaction in this
industry. The absence of a forward market (that was too costly to put into place) was the main
reason why this information exchange was beneficial. In a situation with non-atypical transaction
costs it is however hard to reach the same conclusion.
The views briefly exposed above remind us that the per se prohibition of certain types of
information exchange agreements (e.g. where prices are the core of the agreement) is never entirely
satisfactory because it tends to be ill-fitted to the diversity of agreements that are likely to be
concluded. Should we then go as far as writing that in some cases collusion can enhance welfare?77
We think that even if the economic theory will point to the necessary limits of a per se prohibition
of certain practices, this will still reveal efficient for the vast majority of cases. Moreover, such
prohibition provides the interest parties with some guidelines of what they are allowed to do and
what should not be undertaken. Such a framework is absolutely necessary if one is concerned with
legal certainty.
§2: Market coverage
Another relevant factor is market coverage. In 2001 the Commission issued a Notice on agreements
of minor importance which do not appreciably restrict competition under article 81(1) EC (now
75 Ibid.
76 See L Evans and J Mellsop, supra at 28.
77 This is the position held by C Fershtman and A Pakes in 'A dynamic oligopoly with collusion and price wars', RAND
Journal of Economics 31, No. 2, Summer 2000, pp. 207-236.
21
article 101(1) TFEU) (‘de minimis notice’)78 that provides for thresholds in order to assess such
agreements.79 It is important that firms involved in the exchange have a sufficient market share,
otherwise they risk being constrained by the remaining companies not participating in the
information exchange. Firms that do not fulfil the conditions set out by the de minimis Notice (i.e.
those that do not fall within the so-called ‘safe harbour’), cannot rely on any market share figures
below which their behaviour 80 would be deemed irrelevant and thus legal. In the words of the
Commission in paragraph 87 of the Guidelines: 'what constitutes ‘a sufficiently large part of the
market’ cannot be defined in the abstract and will depend on the specific facts of each case and the
type of information exchange in question'.
§3: Individualization of the information
Another factor that was extensively discussed within the academia before the Commission adopted
its new Guidelines in 2010 is the individualization (or otherwise aggregation) of data. It is
mentioned in the Guidelines that the exchange of aggregated data should normally not lead to
restrictive effects on competition.81
Aggregated data is information that has been compiled so to make it impossible (or sufficiently
difficult) to recognize company level information. By contrast, individualized data is companyspecific information that is particularly valuable for the reasons we already mentioned earlier, i.e.
an easier detection of possible deviations and an easier conception of individual retaliatory
78 See the Commission Notice on agreements of minor importance which do not appreciably restrict competition under
Article 81(1) of the Treaty establishing the European Community [now article 101(1) TFEU] (‘de minimis notice’),
OJ [2001] C 368/13, p.13-15.
79 See for instance para. 7 of the aforementioned notice:
‘The Commission holds the view that agreements between undertakings which affect trade between Member
States do not appreciably restrict competition within the meaning of Article 81(1) [now article 101(1)]:
(a) if the aggregate market share held by the parties to the agreement does not exceed 10 % on any of the
relevant markets affected by the agreement, where the agreement is made between undertakings which are
actual or potential competitors on any of these markets (agreements between competitors); or
(b) if the market share held by each of the parties to the agreement does not exceed 15 % on any of the relevant
markets affected by the agreement, where the agreement is made between undertakings which are not actual or
potential competitors on any of these markets (agreements between non-competitors).
In cases where it is difficult to classify the agreement as either an agreement between competitors or an
agreement between non-competitors the 10 % threshold is applicable’.
80 The Guidelines insist on the fact that the de minimis notice only applies where the information exchange takes place
in the context of another type of horizontal co-operation agreement.
81 This is in line with what was previously said in the Seventh Report on Competition Policy (Brussels-Luxembourg,
April 1978) where we can read that 'the provision of collated statistical material is not in itself objectionable'
whereas 'the organised exchange of individual data from individual firms (…) will normally be regarded by the
Commission as practices (…) which are therefore prohibited'.
22
strategies. Thus the 'collection and publication of aggregated market data (such as sales data, data
on capacities or data on costs of inputs and components) by a trade organisation or market
intelligence firm may benefit suppliers and customers alike82 by allowing them to get a clearer
picture of the economic situation of a sector' (emphasis added).83
Even if the exchange of aggregated data seems efficiency enhancing and thus unlikely to threaten
competition in the market, there are some cases where collusive outcomes could be reached if
specific market conditions are met. The Guidelines mention the example of a tight oligopoly where
a deviation from one of the few firms would immediately be noticed, although the identity of the
‘culprit’ would not be inferred solely from the data. That is, in certain cases the mere observance of
a deviation through aggregated data would be sufficient to trigger retaliatory steps.84 Likewise, in
the Vegetable Parchment case, the Commission stated that:
The regular sending to (…) an association (…) of invoices or other individual data normally
regarded as business confidences would be an indicator of (…) concerted practice [since] for the
preparation of monthly statistics (…) it is sufficient to send only totals from invoices during the
relevant period.85
It thus remarked that the aggregation of data does not constitute a ‘safe harbour’ for firms and that
they have to keep in mind that certain behaviours will be looked at very critically by the
Commission and the ECJ.
One also has to mention the means through which data is been collected, aggregated and shared
among competitors. The Commission will be less concerned if the task is given to a third-party
82 It seems that the Commission only refers to a non-discriminatory disclosure of data by trade associations. K-U Kühn
and X Vives in 'Information Exchanges among Firms and their Impact on Competition', Office for Official
Publications for the European Community, Luxembourg, 1995 make a further distinction between data that will only
be disseminated to the members of the trade association (exclusionary disclosure) and data that will be given to any
interested party (non exclusionary disclosure). If the latter is unlikely to bring competition concerns, the former
should be scrutinized more carefully.
83 See the 2010 Guidelines, supra at 32, at para. 89.
84 This position is also advocated by L Pepperkorn, supra at 53, p. 6. Referring to a model developed by J Green and R
Porter in 1984 he argues that 'below a critical market price level the oligopolists will automatically assume that
someone has cheated and trigger off a price war. This means that aggregate price information could be of use to
oligopolists when trying to collude.'
85 See Vegetable Parchment, OJ [1978] L-70/54.
23
entity, like a trade association, than if it is done by one of the competitors itself.86 This does not,
however, preclude any investigation because, at the end, the information exchange agreement will
be assessed globally taking into account all relevant parameters.
The relevance (for firms) of data that is as disaggregated as possible is demonstrated by the famous
Fatty Acids case.87 In the 1970s the market for fatty acids was dominated by a handful of firms:
Unilever, Henkel and Oleafina, forming a tight oligopoly. Next to these ‘Three Bigs’ were forty
small producers whose capacities were about twenty times lower than the former's ones. A trade
association named APAG88 which accounted for around 90% of the fatty acids market including the
three largest producers operated within the market. This association maintained an information
exchange agreement consisting of aggregated industry data that was in line with the requirements of
EU Competition law on that matter.89 However, another agreement was entered into by the three
largest producers. This agreement appeared likely to restrict competition on the market. It provided
for the exchange of 'individualized data about yearly total sales in the previous three years and
future four-monthly reports about total sales by each of these competitors' (emphasis added).90
Through this mechanism, the three firms were able to monitor each other's individual sales data. As
noted by Kühn, it seems that the plan was to drive small competitors out of the market while
maintaining the relative market shares of the three remaining firms. 91 This can only be done
through the recourse to individualized strategic data and it advocates for the Commission's
precaution when data exchanged is not aggregated.
The Fatty Acids case and the new Guidelines alike advocate for a very orthodox view on the
aggregation of data. Other conclusions have been drawn by Novshek and Thoman in a 1998 paper.
In contrast with Kühn and Vives, 92 they believe that 'when shocks to demand are not perfectly
correlated, firms may have non-collusive incentives to share disaggregated information' (i.e. also
about price and output data).93
86 Similar outcomes can be found in the United States, see for example DOJ, Business Review Letter concerning Hyatt,
Imler, Ott & Blount, P.C (June 12, 1992) – no challenge to a proposal by a public accounting firm in Atlanta to
compile, analyse, and publish data on the prices charged by Georgia hospitals.
87 See Fatty Acids, OJ [1987] L-3/17.
88 Association des Producteurs d'Acides Gras.
89 See the Seventh Report on Competition Policy, Office for Official Publications of the European Communities,
Brussels-Luxembourg, 1978.
90 See KU Kühn, supra at 66.
91 Ibid.
92 See KU Kühn and X Vives, supra at 17.
93 See W Novshek and L Thoman, 'Information disaggregation and incentives for non-collusive information sharing',
Economics Letters 61, 1998, pp. 327-332.
24
Analysing a model in which firms sell the same product in a number of independent regions and do
not coordinate, they write that:
This means that if information is shared as a list of the members' signals, then an anonymous list is
inferior to a non-anonymous list, since firms do not know the weight to attach to a signal without
knowing who received the signal (…) Any other information exchange mechanism (no sharing,
or anonymous disaggregated sharing, or aggregated sharing, either as an overall average or as
market-by-market averages) provides less precise information to firms and is inferior to
consumers' and total surplus (emphasis added).94
§4: Age of the information
Let us now turn to the criterion of the age of the data. This is again particularly decisive because the
exchange of historic data will be less likely to favour collusion than current data as it will not
disclose competitors' future plans and then will not help firms better understand the market and to
retaliate timely. Moreover, paragraph 90 of the Guidelines states that 'exchanging historic data is
unlikely to facilitate monitoring of deviations because the older the data, the less useful it would be
for a timely detection and thus a credible threat of prompt retaliation'.
If historic data does not have the potential to help detecting deviation, it can however be useful for a
firm to better understand his competitor(s)' behaviour on the market, to make predictions from it
and ultimately to monitor deviations.
In any case it is the Commission that will assess the relevance of the data at hand on a case-by-case
basis. Indeed, there is no threshold below which data becomes historic, but certain characteristics of
the market seem decisive, for instance 'the frequency of price re-negotiations'.95 The Guidelines
then give an useful example: 'data can be considered historic if it is several times older than the
average length of contracts in the industry if the latter are indicative of price re-negotiations'.96
Pepperkorn is a bit more specific when he writes that 'recent information on pricing or output or
sales reveals who is defecting and allows an assessment of the possibilities to apply and endure
punishment'.97
94
95
96
97
25
Ibid.
See the 2010 Guidelines, supra at 32, at para. 90.
Ibid.
See L Pepperkorn, supra at 53, p. 6.
It is interesting to note that the Commission does not mention (in this part) its policy towards the
exchange of data on future intentions (e.g. planned future prices, production, launch of new
products, investments in R&D, capacities increases or reductions...) It could also be argued (in line
with Pepperkorn) that if intentions are not binding, they will just qualify as ‘cheap talk’98 and will
not increase the likelihood of collusion. We nevertheless think that such information constitute
signals that are likely to be taken into consideration by competitors. They will for instance value
this data if there is a “tradition” of reliable signal-jamming within the market, i.e. if competitors
tend to stick to their announcements.
§5: Frequency of the information exchange
Again there is no threshold below which an information exchange would be deemed harmful for
competition. In its assessment the Commission will look at the characteristics of the market under
consideration, such as the length of the contracts between firms and of course the nature, age and
aggregation of data. One important note is that 'depending on the structure of the market and the
overall context of the exchange, the possibility cannot be excluded that an isolated exchange may
constitute a sufficient basis for the participating undertakings to concert their market conduct and
thus successfully substitute practical co-operation between them for competition and the risks that
that entails'.99
In the 1994 Steel Beams case, the Commission condemned an information exchange agreement on
orders and deliveries of beams by individual companies in each Member State. 100 Beyond the
extreme individualization of the data exchanged, a major concerned was the frequency (once a
week) at which it was exchanged. This obviously helped the companies to sustain collusion in a
more unstable market.101
98 Some authors like B Overgaard and HP Møllgaard speak of ‘soft and non-verifiable information about intentions’.
See 'Information Exchange, Market Transparency and Dynamic Oligopoly', supra at 15.
Note that some authors like J Farrell in 'Cheap talk, co-ordination and entry', Rand Journal of Economics 18, No. 1,
1987, have given more value to the concept of 'cheap talk' when other players attach value to the statements made.
99 See the 2010 Guidelines, supra at 32, at para. 91, Note (4). The Commission there refers to the T-Mobile
Netherlands B.V. case:
59. 'Any other interpretation would be tantamount to a claim that an isolated exchange of information between
competitors could not in any case lead to concerted action that is in breach of the competition rules laid down in the
Treaty. Depending on the structure of the market, the possibility cannot be ruled out that a meeting on a single
occasion between competitors, such as that in question in the main proceedings, may, in principle, constitute a
sufficient basis for the participating undertakings to concert their market conduct and thus successfully substitute
practical cooperation between them for competition and the risks that that entails'.
100See Steal Beams, OJ [1994] L-116/1, [1994] 5 CMLR 353, at para. 263-272.
101See also American Column & Lumber Co. v United States, 257 US 377 (1921) at para. 410, for a US perspective:
26
§6: Publicity of the information exchange and of the data thereof
Finally we have to address the issue of the publicity of the information exchange and of the data
thereof. If the information exchanged is readily available to all players on the market it seems that
no collusive outcome could possibly be met. The Guidelines nevertheless insist on the genuine
public availability of this data:
For information to be genuinely public, obtaining it should not be more costly for customers and
companies unaffiliated to the exchange system than for the companies exchanging the
information'.102
It seems irrational for a company to spend time and resources in order to collect public data and to
share it if access to it is already guaranteed at a low cost. For this reason, exchange of genuinely
public information seems unlikely. The definition given by the Guidelines proves useful when
assessing data that has been categorized (by the “exchanging” firms) as being 'in the public domain'.
According to the Commission, data will not be classified as such unless 'the costs involved in
collecting the data [does not] deter other companies and customers from doing so'.103
To conclude, it is the information exchange itself that can trigger a reduction of competition in the
market if the data exchange therein 'is not made equally accessible (in terms of costs and access)104
to all competitors and customers'.105 If the information exchange is public it will also be less likely
to harm competition because it will be easier for outsiders to detect collusive outcomes stemming
from it.
'Genuine competitors do not make daily, weekly and monthly reports of the minutest details of their business to their
rivals'.
102See the 2010 Guidelines, supra at 32, at para. 92.
103Ibid.
104‘Genuinely public information' is understood in a broader sense in Linklaters LLP, 'Comments of Linklaters LLP on
the European Commission's draft Guidelines on the applicability of Article 101 of the Treaty on the Functioning of
the
European
Union
to
horizontal
cooperation
agreements',
available
at:
<http://www.linklaters.com/pdfs/publications/competition/100616_HorizontalGuidelines.pdf>, accessed 9 May
2011, p.7, at 4.4: 'It should be made clear that this condition is met where every market player can obtain the
information without significant additional cost or delay'.
105See the 2010 Guidelines, supra at 32, at para. 94.
27
Section 4: Clearance of an information exchange agreement found unlawful under article
101(1) TFEU (assessment under 101(3) TFEU)
Once the agreement has been assessed under article 101(1) TFEU it can be cleared or not. If the
agreement poses some competition issues, the Commission will decide if it can nevertheless benefit
from an exemption under article 101(3) TFEU. It has to be recalled that this procedure in practice
only applies with regards to agreements that are not restrictive of competition by object.106
In subpart 3 we find four conditions (hereunder reformulated) that are to be fulfilled by agreements
before benefiting from an exemption by the Commission:
−
the agreement has to lead to efficiency gains;
−
the agreement does not have to go beyond what is necessary in order to reach these
gains;
−
the agreement has to provide for a fair share of the benefits with consumers;
−
the agreement does not have to eliminate competition in the market.
§1: Efficiency gains
Kühn distinguishes between three effects of information exchange on welfare.107 First the 'quantity
adjustment effect' appears where an informed firm is able to produce more in high demand states
and to reduce its output in low demand states. It is assumed that the gains from the increased
production in high demand states will (more than) compensate the consumers for their losses in low
demand states (where they will not benefit anymore from the excessive output of the firm that
triggered a downwards price adjustment). The second effect is prompted by the 'preference for
variety'. For Kühn, 'if firms have heterogeneous information about a common demand (or cost)
parameter, the pooling of information will smooth across different varieties which will be valued
positively by consumers with preference for variety'.108 Finally, the 'selection effect' arises 'from the
(more efficient) reallocation of production between companies flowing from the information
106Indeed, if an agreement has the restriction of competition as its object, in practice it will never benefit from an
exemption under article 101(3) TFEU. See for instance the 1966 STM v Maschinenbau Ulm case, [1966] ECR 235,
[1966] CMLR 357.
107See KU Kühn, supra at 66, p. 189.
108Ibid.
28
exchange'.109
Paragraph 96 of the Guidelines provides for allocative efficiencies with companies orienting their
production towards 'high-demand markets' or 'low cost companies'. These efficiencies are
demonstrated by an example where companies have been able to 'reduce unnecessary inventories'
and to come to a 'quicker delivery of perishable products to areas with high demand and their
reduction in areas with low demand'.
The Guidelines mention the specific situation of the banking and insurance sector where
information exchange between firms has efficiency-enhancing effects. Indeed, companies here are
able to propose individualized contracts to consumers according to their 'risk profile'. This
eliminates the lock-in effect of customers not daring to switch between companies because they do
not want to lose the benefit conferred e.g. by their long driving period without accident. More
arguably, the Commission also affirms that the information exchange would induce customers to
reduce their risk exposure.
Some efficiencies are also seen in the exchange of price information, hence in a limited set of
circumstances, e.g. where the exchange is made genuinely public and allows consumers to compare
current prices. Logically this is not the case with future pricing intentions. By their very nature
intentions are subject to further changes and they can act as 'cheap talk' allowing companies to align
their prices without incurring any adjustment costs. The situation would obviously be different were
the price announcements binding. This 'cheap talk' mechanism has been observed within the leisure
industry in relation to price announcements on flight tickets.110
Paragraph 100 concludes by stating that 'exchanging present and past data is more likely to generate
efficiency gains than exchanging information about future intentions'. Counter-example seem
scarce, e.g. companies engaged in a R&D race, being able to 'avoid duplicating costly efforts and
wasting resources' if they know in advance that they will not win that race.
109Ibid.
110See United States v. Airline Tariff Publishing Company (ATP), 836 F. Supp. 9 (D.D.C 1993) (final judgement) The
companies managed to fix ticket prices and to coordinate fare changes, thus triggering a price increase for
consumers. For more information on the case, see W Gillespie, 'Cheap Talk, price announcements and collusive
coordination', DOJ, Discussion Paper No. EAG 95-3.
29
§2: Indispensability
The Guidelines are very clear on that matter, paragraph 101 mentioning that:
(…) for fulfilling the condition of indispensability, the parties will need to prove that the data's
subject matter, aggregation, age, confidentiality and frequency, as well as coverage, of the exchange
are of the kind that carries the lowest risks indispensable for creating the claimed efficiency gains.
The burden of proof is then on the parties carrying on the information exchange. They have to make
sure that they do not go beyond what is strictly necessary for implementing their efficiencyenhancing agreement.
§3: Pass-on to consumers & non-elimination of competition
The two last conditions are relatively straightforward. Concerning the pass-on, companies have to
make sure that the gains consumers derive from the agreement outweigh the restriction entailed by
it. It is mentioned that the lower the market share of the undertakings, the less likely the agreement
will cause competition concerns. Concerning the non-elimination of competition there is no need to
further develop on that aspect.
§4: Examples and summarizing tables
In order to bring more clarity, the section two of the Guidelines presents six examples where the
criteria discussed above are used to assess a series of information exchange agreements.
Paragraph 108 is particularly concerned with companies engaging in benchmarking. The example
provided, albeit somehow simplistic, is demonstrative of the will of the Commission to engage in a
more economic approach (including the taking into account of all possible efficiencies) towards
such phenomena as benchmarking. We will analyse benchmarking in great detail in the second and
third chapter of this thesis.
As a conclusion of this chapter, we drew three tables (inspired by the outcomes of Nitsche, von
Hinten-Reed, Kühn and Pepperkorn) that attempt to summarize what kinds of information exchange
are critical for sustaining collusion. Bold/ underlined/ italic items belong together.
30
(a) Information exchange that may facilitate coordination
Variable
Characteristics of the information exchange
Data
Output prices, Sales, Capacities, Quantities, Production plans
Time period
Future, recent past
Frequency
Relatively frequent
Aggregation
Disaggregated (individualized)
Availability
Private and Public
(b) Information exchange that may help detect cheating (free-riding)
Variable
Characteristics of the information exchange
Data
Output prices, Sales, Output
Time period
(Recent) past or Present
Frequency
Relatively frequent
Aggregation
Disaggregated (individualized)
Availability
Private and Public
(c) Information exchange that may improve the ability or reduce the cost of punishment
Variable
Characteristics of the information exchange
Data
Output prices, Sales, Output. Capacities, Cost structures, Demand
Time period
(Recent) past or future, Current
Frequency
Relatively frequent
Aggregation
Disaggregated (individualized)
Availability
Private and Public
31
32
Chapter II
Benchmarking as a managerial tool that is likely to be seen critically by lawyers
Section 1: What is benchmarking?
In the introduction of this thesis we briefly described benchmarking as '(...) the process of
measuring the performance of one's company against the best in the same or another industry'.111
As a management concept, (modern) benchmarking was invented by Xerox at the end of the 1970s.
The story is told by Robert C. Camp, the former manager of competency quality and consumer
satisfaction at Xerox Corp. in a 1993 article.112 Very enthusiastically he describes the phenomenon
in the following terms: 'it is the process of finding better practices, bringing them back and handing
them off, first to quality teams and then to employee involvement teams (...) to implement those
practices'.113
These two definitions help us approach the essence and importance of benchmarking. For Boxwell,
benchmarking is certainly not the first managerial tool that has been used by companies.114 Yet, it is
probably the most efficient in the sense that is associates the design/conception, supervision and
execution levels to a common goal. It allows managers to improve strategy while, at the same time,
it gives them practical tools to implement changes at the line level. To put it shortly, benchmarking
encompasses the strategy and its implementation. 'It looks at how a product or service is
produced',115 draws conclusions from this and implements them within the firm.
Boxwell gives three reasons why benchmarking is becoming so widely practiced.116 First, it is 'a
(more) efficient way to make improvements':
Managers can use processes that others have already proved effective and concentrate their own
111See Stevenson, 1996, quoted by WM Lankford in 'Benchmarking: understanding the basics', The Coastal Business
Journal 1, Number 1, p. 57.
112See RC Camp, 'A Bible for Benchmarking, by Xerox', Financial Executive, July/August 1993, pp. 23-27.
113Ibid, p. 23.
114See RJ Boxwell, Benchmarking for Competitive Advantage (McGraw-Hill, Inc.), p. 2.
115Ibid.
116Indeed, in ML Dertouwos, RK Lester and RM Solow, Made in America (MIT Press, Cambridge (MA), 1989) we
can read that the MIT Commission on Industrial Productivity reported in 1989 that: 'a characteristic of all the bestpractice American firms, large of small, is an emphasis of their products and work processes with those of World
Leaders in order to achieve improvement and measure progress'.
33
tabula rasa thought on developing ways to improve these processes or tailor them to fit their own
117
organizations' existing culture and processes.
Second, 'it helps organizations make improvements faster': 'A mature benchmarking capability
within an organization will enable that organization to do things better and faster by working
through the benchmarking process more quickly'.118
And third, 'it has the potential to bring (…) collective performance up significantly'.119
Based on several authors' contributions we will now distinguish between two main types of
benchmarking, that, for the sake of clarity, we will name internal and external benchmarking.
§1: Different kinds of benchmarking
A) Internal benchmarking
First we find internal benchmarking. It relates to a tool used by loads of large companies to 'identify
best in-house practices and disseminate the knowledge about those practices to other groups in the
organization'.120 It is typically seen as a first step in the assessment of a firm's weaknesses before
focusing the attention on competitors within and outside of the industry.
Boxwell underlines the logic of starting a benchmarking undertaking with an internal assessment.
First, it provides the team with some valuable insights that will act as the basis for further
researches. In other words it pinpoints the core issues within the organization. Second, it allows the
team to gather some data and experience that will be shared with competitors at a later stage.
Finally, internal staff will be much less reluctant to share information with the benchmarking team
than would another company's personnel.
Camp mentions other reasons that militate in favour of internal benchmarking. He writes that 'large
organisations have multiple of the same unit set up to do the same thing, such as similar marketing
offices, districts, multiple distribution centres and order-taking points'.121 Thus, a best-in-company
(the internal benchmark) can be found and other units can be brought to the same level. This would
be a first step in enhancing a company's performance.
117See RJ Boxwell, supra at 114, p. 19.
118Ibid, p. 20.
119Ibid.
120Ibid, p. 33.
121See RC Camp, supra at 112, p. 25.
34
It nevertheless appears that internal benchmarking cannot be the sole aim of a corporation. Indeed,
such a procedure will not automatically allow a company to catch up with its competitors which
may have already gain a considerable advantage that cannot be reduced without analysing them.
This outward-looking attitude is even more important if one considers that the aim of a firm is often
to overtake its competitors and to gain a strategic advantage over them. This leads us to the other
types of benchmarking.
B) External benchmarking
Contrary to the practice that has been identified earlier, external benchmarking involves comparing
itself with outsiders (within or outside the company's industry).
First, firms can engage in competitive, cooperative or collaborative benchmarking. Differences
between these exercises are mainly of a semantic nature. Nevertheless, some key features can be
highlighted.
In competitive benchmarking, firms are active on the same market.122 The aim is to compare its own
processes with competitors that are obviously not particularly willing to share what they may
consider valuable information and techniques.123
In cooperative benchmarking, securing the participation of other firms is achieved more easily
because these are either non-competitors or they esteem that they are not in direct competition. In
this respect, collecting data from these companies will be much more straightforward.124
Finally, collaborative benchmarking is probably the easiest way for companies to exchange
information and good practices. Within this scheme, companies will agree to share certain
information among themselves in the hope that they will benefit from each other's data to improve
their own processes and functions. 125 To make the whole system smoother, the collecting (and
122An example would be Intel comparing its processor production performance with AMD.
123 Another definition can be found in KHJ Leibfried and CJ McNair, Benchmarking: A Tool for Continuous
Improvement (First Edition, Harpercollins, 1992), p.115:
'Competitive benchmarking focuses on key production methods and characteristics that can provide a competitive
advantage over a company's direct competitors. It is the most similar to traditional competitive assessment of all the
benchmarking approaches, yet it is markedly different. The target is not knowing the score but rather changing it. If
competitor A can deliver the product in two weeks while it takes us five, they have a competitive advantage.
Knowing this fact is not comforting, but it is undoubtedly action-generating'.
124An example of this process can be found in RJ Boxwell, supra at 114, p. 32: '(…) managers at a CAD/CAM
software company benchmarked HP, IBM and Xerox in the area of after-sales service and support'.
125See RJ Boxwell, supra at 114, p. 32, gives the following example: 'Managers from the training organization of a
large financial services firm organized an ad-hoc consortium to study training processes at a number of US firms
that are considered leaders in training. Participants included American Airlines, AT&T, NCR, Auad Graphics,
Solectron and USAA (…)'.
35
aggregating) task is often given to a third party, that may not be part of the benchmarking
companies' industry. However, this is not always the case. Sometimes, the entity entrusted with this
task is also a member of the industry into consideration, but it takes this extra burden upon itself
because it does not have enough valuable information or good practices to share with the others. Its
task is then a sort of 'payment in kind'.
From these first considerations, our focus will evidently be on external benchmarking, especially
when companies are close competitors (competitive/collaborative benchmarking). In order for us to
assess how benchmarking fits with rules on competition we first have to analyse the typical steps of
a benchmarking exercise.
§2: The typical steps of a benchmarking exercise
Ask three different firms and you are likely to get three different methods to conduct a
benchmarking study. This should not be surprising because benchmarking is only a set of items one
has to pay attention to in order to improve one’s processes. In that sense, it is not a strict series of
steps that are to be meticulously followed at the risk of failing.
However, authors have tried to distinguish some tasks that may well help a company reach its goals.
In this section we will rely on Boxwell's seven steps process.126
A) Determine which activities to benchmark (and how this will be done)
1. Which activities?
An average organisation is obviously aware of areas where improvements would be welcomed, if
not urgently needed. Yet, what could be trickier would be to prioritize activities that need to be
benchmarked. The key, and it is not surprising, is the added value a company will derive from
benchmarking.
Within a company, a series of costs are incurred (the cost chain). Depending on the industry the
company is active in, these may be, for instance, materials, labour costs, maintenance expenses,
administrative costs or R&D investments. Obviously the activity that will be benchmarked should
represent the most representative (generally largest) cost item. This holds true within an industry
that is not driven by innovation, e.g. where cost differentiation can achieve higher market shares. In
126See Figure No. 1 – Boxwell refers to its methodology as a ‘eight-step-process’. We decided to name it ‘seven-stepsprocess’ because two of these steps have to be completed simultaneously (or almost simultaneously).
36
a different kind of market (such as the market for netbooks), one will not obtain higher market
shares by solely relying on cost reduction. Here other forces are at work and companies may want
to differentiate themselves from their competitors in another manner. At the end of the 1990s, Apple
was a company confronted with a slumping turnover. In order to become the successful MNC it is
today, it developed new, innovative products (such as the iMac, the iPod and later the iPhone and
the iPad). Apple did not gain new customers through a reduction of price but rather through an
innovation strategy. If, during the late nineties, it had conducted some benchmarking studies, Apple
would have certainly decided to concentrate on innovation, maybe by refocusing its expenses on its
R&D department.
On a different note, Boxwell also mentions a software company that decided to provide its
customers with a world-class after-sales service in order to differentiate itself from its
competitors.127
There are also less tangible reasons that trigger the conduct of a benchmarking study. One of them
is a favourable climate for change within an organisation, i.e. people are ready or even willing to
change because they are aware that they rank poorly in terms of efficiency.
Finally, it has to be said that it exists alternative methods to determine what activities should be
benchmarked for improvement. Why not ask the staff, that is closest to the production, what
activities should be enhanced in its own opinion? To do so, one can use a forced-choice survey
where people 'are given [a certain amount of] points and told to allocate them, as they see fit, to the
possible choices'.128
2. What benchmarking team?
The need for a permanent or temporary benchmarking team will depend on the frequency of such
exercises within one's organization. Boxwell says that from six studies per year, there could be a
need for a permanent team that will focus on benchmarking.129
In any case, an efficient group will comprise one or several experts (‘benchmarking gurus’) who
know how to deal with such an exercise and who possess experience gained in conducting them
previously. These persons will be working with a line representative or manager, i.e. a person who
is confronted with everyday work at the lowest level. His/her presence shall also secure staff
127See RJ Boxwell, supra at 114, p. 58.
128Ibid, p. 60.
129Ibid, p. 62.
37
cooperation. Finally, if one wants this enterprise to be successful, there must be an influential
person who will offer his/her support (‘the change leader’). The team does not have to be large, as
experience shows that teams comprising up to six persons work well.
3. How to conduct the study?
Benchmarking specialists suggest that a study should be conducted within a period of
approximately twelve weeks. This length has not been chosen randomly. In fact, it will give the
team enough time to satisfactorily complete the study while ensuring that certain drawbacks are
avoided.
Indeed, with a benchmarking exercise planned to last longer, there is the risk that staff (and
potentially support) will not be at disposal anymore (at the end of the study) or that people will lose
interest in the study (because they will feel less under pressure). Worse, data collected at the
beginning of the research may become obsolete by the end of it.
In order to make sure that the team is not running out of time and will be able to deliver the results
on time, it is suggested to establish a strict schedule for each task and to track down the relevant
time data. These will also be of use for further studies.
38
Figure No.1: Boxwell's seven (eight)-step process.130
39
B) Determine key factors to measure
In a 1991 article, Mr A.S. Walleck (Chairman of the Board and CEO of Berlin Industries/Perfecta
Products, formerly at McKinsey&Company) wrote the following advice: 'A few truly comparable
numbers are worth much more than volumes of poorly understood, unverifiable data. Cost, quality
and timeliness are the three variables to be measured; always measure all three'. (emphasis
added)131 These are the key factors that will give a manager the most valuable information about
how well a company is performing.
These broad guidelines are to be adapted to every particular undertaking and are not meant to be
treated as straightjackets. Indeed, the team should be able to change focus during a study if it
appears that the process measured turns out to be ill conceived.
In the following section we will discuss the relevance of the data measured, both from a managerial
and from a legal perspective.
C) Identify foremost practice companies
Boxwell distinguishes between four groups of potential candidates: current direct industry
competitors, latent competitors, best-in-class groups from own organization and best-in-class
companies from other industries. 132 In this paper, we will deliberately not deal with internal
benchmarking that does not pose a problem for antitrust authorities. For the same reason, we will
leave aside benchmarking that is being done with non-competitors. We are then left with current
direct industry competitors and latent competitors.
From a managerial perspective, it would be meaningless not to analyse how direct competitors
perform. To do so, one can try to directly exchange best practices with them (if they agree to do so)
or one can try to gather information and insights from own customers who are likely to deal with
competitors as well. Own employees, who are confronted with competition on a daily basis may
also be knowledgeable. However, it would also be unprofessional not to pay attention to latent or
potential competitors who are not seen as “threats” but could enter one's market in the (near) future.
Moreover, foremost practices companies are firms that are successful because they have
implemented an efficient strategy. They obviously derive benefits from it that can then be translated
into a higher turnover. It thus appears crucial to identify firms that present high financial results.
130See fn 126 for an explanation of the number of steps included in the process.
131See AS Walleck, 'Manager's Journal’, WSJ, 26 August 1991, p.8.
132See RJ Boxwell, supra at 114 p. 68.
40
Finally, one also has to pay attention to strategies and business systems.133
1. Financial Results
These are assessed through an analysis of growth, liquidity, profitability, asset utilization and
leverage.
Growth rates represent 'the amount of increase that a specific variable has gained within a specific
period and context. For investors, this typically represents the compounded annualized rate of
growth of a company's revenues, earnings, dividends and even macro concepts - such as the
economy as a whole'.134 Compound annual growth rate (CAGR)135 (in revenues) can be described
as 'a smoothed annualized gain of an investment over a given period of time'.136 There are other
means to calculate a firm's growth (assets...) that we will leave aside for this thesis.
Liquidity relates to 'the ease with which a company can pay its bills and liabilities over the next
year, especially if it must convert its assets into cash in order to do so'. 137 It can be measured
through the company's current ratio that compares a firm's current assets to its current liabilities.
Profitability can be estimated with an assessment of the return on sales,138 return on assets,139 return
on equity140 and return on capital employed.141
Asset utilization can be approach through the recourse to the Day's Sales Outstanding (DSO),142
133Ibid, p. 133.
134Source: <http://www.investopedia.com/terms/g/growthrates.asp>, accessed 5 May 2011.
135
Where V(t0): start value ; V(tn): finish value ; tn-t0: number of years.
136Source: <http://www.investopedia.com/terms/g/cagr.asp>, accessed 5 May 2011.
137Source: <http://financial-dictionary.thefreedictionary.com/Accounting+Liquidity>, accessed 5 May 2011.
138Return on Sales= Operating income/ net sales (revenue). This gives a good indication of the profitability of an
undertaking as it shows what proportion of its revenue remains before taxes and other indirect costs are paid.
139Return on Assets= Net income/ Mode of total assets. This figure will give an indication of how many euros a
company can derive from each euro of assets it possesses. Note that this number is only relevant within the same
industry.
140Return on Equity= Net income after tax/ Shareholder equity. This number measures the ability of a firm to generate
profits from every unit of shareholder's equity. It shows how well a company make use of investment funds to
generate earning growth. Return on equity is only relevant within the same industry.
141Return on Capital Employed= (Net operating profit – Adjusted Taxes)/Invested Capital. This measure shows how
much cash flow a company can generate in relation to the capital that has been invested in the business.
142Day's Sales Outstanding (DSO) is the measure of the average number of days that a company takes to collect
revenue after a sale has been made. (Source: <http://www.investopedia.com/terms/d/dso.asp>, accessed 5 May
2011). A high DSO number thus means that a company is selling its products on credit.
Calculation: DSO= (Accounts Receivable/Total Credit Sales) x Number of Days.
41
Day's Sales of Inventory (DSI),143 working capital/sales and fixed assets/sales.
Finally, leverage is best approached through the calculation of the Debt-to-Capital ratio,144 Debt-toEquity ratio,145 Debt-to-Assets ratio,146 interest coverage147 and fixed-charge coverage.148
2. Strategies
This consists of a more macro-level picture, where the global strategy of a firm is being assessed
(does it rely on low prices or rather on other factors that make people perceive a higher value?)
3. Overall Business System
This can be done through the recourse to the Porter's Value Chain.149 We do not investigate that
aspect in this thesis.
143DSI is a financial measure of a company's performance that gives investors an idea of how long it takes it to turn its
inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower (shorter) the DSI
the better, but it is important to note that the average DSI varies from one industry to another. (Source:
<http://www.investopedia.com/terms/d/dsi.asp>, accessed 5 May 2011).
Calculation: DSI= (Inventory/Cost of sales) x 365.
144Debt-to-Capital Ratio is company's debt divided by its total capital. Debt includes all short-term and long-term
obligations. Total capital includes the company's debt and shareholders' equity, which includes common stock,
preferred stock, minority interest and net debt. (Source: <http://www.investopedia.com/terms/d/debt-tocapitalratio.asp>, accessed 5 May 2011).
Calculation: DtC= Debt/(Shareholders' Equity+Debt).
145Debt-to-Equity ratio is the measure of a company's financial leverage calculated by dividing its total liabilities by
stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.
(Source: <http://www.investopedia.com/terms/d/debtequityratio.asp>, accessed 5 May 2011).
Calculation: DtE= Total liabilities/Shareholders' Equity).
146Debt-to-Assets ratio is a metric used to measure a company's financial risk by determining how much of the
company's
assets
have
been
financed
by
debts.
(Source:
<http://www.investopedia.com/terms/t/totaldebttototalassets.asp>, accessed 5 May 2011).
Calculation: DtA= (Short term debt + Long term debt) / Total Assets.
147Interest Coverage is a ratio used to determine how easily a company can pay interest on outstanding debt. (Source:
<http://www.investopedia.com/terms/i/interestcoverageratio.asp>, accessed 5 May 2011).
Calculation: IC= Earnings Before Interest and Taxes / Interest Expense.
148Fixed Charge Coverage is a ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest
and leases. (Source: <http://www.investopedia.com/terms/f/fixed-chargecoverageratio.asp>, accessed 5 May 2011)
Calculation: FCC= (Earnings Before Interest and Taxes / Fixed Charge before tax) / (Fixed Charge before tax
+Interest).
149The Porter Value Chain shows 'the specific activities through which firms can create a competitive advantage, it is
useful to model the firm as a chain of value-creating activities'. Source: <http://www.quickmba.com/strategy/valuechain>, accessed 6 May 2011.
42
D) Measure performance of foremost practice companies and compare it to your own performance
In order to be able to measure competitors' performance one needs to have access to them.150 But
why would a direct or even latent competitor agree to share valuable information, if not for the sake
of colluding? An explanation is the added value it will get in return for this exchange of
information. If the company engaged in benchmarking offers some valuable data about fields where
it excels, and if the target company assesses that it would benefit from it, it will be most willing to
share its own data. When planning an benchmarking study, a company has to keep in mind that the
bigger the degree of competition with the target and the more sensitive the information wanted, the
harsher it will be to obtain this information. This principle is illustrated in Figure 2 below.
Let us assume that the cooperation of a target firm has been secured through the promise that it will
benefit from the company's best practices. We already developed on that aspect. Indeed, it is crucial
that each company brings something in return to make benchmarking meaningful for both parties.
Could we conceive that participation in a benchmarking study would be something of an ethical
obligation within a given industry? Here, we find two conflicting objectives. On the one hand,
taking part in a benchmarking study should always be done on a voluntary basis. Is the participation
compulsory, then risks of collusion appear. On the other hand, there is an implicit Code of Conduct
when it comes to benchmarking. One of the principles mentioned by the American Productivity and
Quality Center is the willingness ‘to provide the same type and level of information that you request
from your benchmarking partner to your benchmarking partner’.151
Practically, it is highly unlikely that a firm that benefitted from benchmarking will be reluctant to
share its own achievements in the future. This situation would be contradictory to the win-win
philosophy implicit in benchmarking.
The benchmarking study is then almost ready to start. One thing remains to be done: collecting own
data, in order to be able to compare it with the target company's data. This is something that should
not pose any problem though it may appear time-consuming.
We will now shortly describe which means are offered to benchmarking teams if they want to know
more about their competitors. A thorough discussion about the antitrust aspects of these means will
be conducted in the following section of the thesis.
150We voluntary leave aside industrial spying, that would be a concern not only for competition law but also for
criminal law.
151
See
<http://ateam.lbl.gov/cleanroom/benchmarking/code.html>,
accessed
14
June
2011
and
<http://www.apqc.org>, accessed 14 June 2011.
43
1. Analysis of publicly available data
Boxwell estimates that about 30% of the data needed to perform the study can be derived from
public sources. 152 These are quite varied and range from companies' annual reports, advertising
prospectuses to Stock Exchange analysts' reports. A host of valuable information can also be
derived from the industry trade association.
2. Collection of data from discussion with informed persons
First, but not always self-evident, one company can (and should) interview its own employees. The
bigger the firm, the more likely it is that some of its employees worked previously for a competitor.
They can provide some valuable insights but attention should be paid to the non-disclosure clause
they may have entered into with their former employers.
In the second place, customers may know a great deal about one's competitor(s). This is not
surprising if one thinks that they often have business relationships with several firms. A smart
benchmarking team will probably be able to get information about prices, distribution channels,
rebates, product characteristics and after-sales services.
Then, one can also consider consulting an industry analyst who will have more precise insights into
it. Finally, distributors, agents and vendors may be contacted for further information.
3. Direct exchange of information with competitors
Data-sharing arrangements will provide the benchmarking team with the most valuable information.
It is also assumed that data quality (topicality, precision) will be secured.
Within such a scheme, companies interested in improving their performance will forward some data
to a third party (more rarely to their competitors directly). This third party (that may be part of the
industry into consideration or not) will gather the data, process it and issue a report that it will give
to companies taking part in the study. Information may or may not be aggregated. If the data has
been sufficiently anonymized, it may however inform a company of its ranking within the industry,
without providing any names, neither of the leader nor of other players.
Information sharing can also take the shape of phone calls to competitors' employees or site visits,
i.e. an agreement upon which the benchmarking team will visit, for instance, the factory of a
152See RJ Boxwell, supra at 114, p. 91.
44
company from which it expects learning valuable lessons regarding its work organization, etc...
4. Data analysis
Once data has been collected, it will provide nothing if a thorough analysis is not conducted by the
benchmarking team. Without going into many details, one can say that own company's data has to
be compared with competitor's data. In order to do so, one must reduce both data (metrics) to a
common denominator. Once this has been achieved, experts may want to draw conclusions from it,
for instance by assessing competitive gaps that are controllable or not.
It is then time to implement the findings stemming from the study.
E) Develop plan to meet and exceed or improve lead
A report underlining the areas where improvements are to be made can prove exceptionally useful,
but only if it is used to trigger changes. Improvements have to be translated into practical terms (i.e.
concrete recommendations for staff) to be implemented. The team has also to remain realistic and
take into consideration financial, human and time constrains.
F) Obtain commitment from management and employees
As a radical method for change within an organization, benchmarking obviously needs the full
support of both line persons and top-level executives. We will not develop further on this aspect.
G) Implement plan and monitor results
This is it: the study has been carefully planned and executed. A report has been drafted and
conclusions have been drawn from it. Concrete actions to improve processes have also been
conceived. Now they have to be implemented in a proper manner! This step involves deadlines and
milestones and the issuance of progress reviews, among others. Finally, one has to be aware of the
need for frequent recalibration. Frequency is a function of the evolution of the industry and of the
nature of the process being benchmarked.153
153See RJ Boxwell, supra at 114, p. 126.
45
Figure 2: Activity v ease of data collection154
46
H) Start over the whole process
As powerful as it is, benchmarking can only provide improvements to a certain extent. Thus, after a
while, it would be wise for a firm to restart a study in order to meet or set new standards in one's
industry. In that sense, benchmarking is a never-ending process.
Section 2: How does benchmarking relate to EU Competition Law?
Let us now turn to the most sensitive aspect of benchmarking: the access to competitor's own
(private) data. There are several ways to collect information that will allow a company to draw
conclusions as to the best practices within an industry. Some will seem harmless, whereas other will
draw the attention of competition lawyers.
We already pointed out the likelihood that direct exchange of information with competitors would
be seen with caution by any competition authority. Nevertheless, this suspicion will greatly depend
on the nature of data that is being exchanged (we will develop this point in Chapter III).
In a speech she held before the American Society of Association Executives in 1994, ML
Azcuenaga (ex Federal Trade Commissioner) stated that the information exchange conducted
through benchmarking could relate to production, inventories, shipments or capacity data.155
More precisely, the aim will be to obtain performance indicators. These Key Performance
Indicators (KPI) 156 can be divided into five sub-categories: quantitative indicators, practical
indicators, directional indicators, actionable indicators and financial indicators. We want now to dig
into the so-called quantitative indicators that are most relevant for our study.
154This figure is an adaptation of a diagram found in RJ Boxwell, supra at 114, p. 87.
155See ML Azcuenaga, ‘Price Surveys, Benchmarking and Information Exchanges’, Speech before the American
Society of American Executives, 8th Annual Legal Symposium, Loews L’Enfant Plaza Hotel, Washington D.C., 8
November 1994, p. 4.
156'Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success
factors of an organization. They will differ depending on the organization'. '(…) If a company Key Performance
Indicator is “Increased Customer Satisfaction”, that KPI will be focused differently in different departments. The
Manufacturing Department may have a KPI of “Number of Units Rejected by Quality Inspection”, while the
Sales Department has a KPI of “Minutes A Customer Is On Hold Before A Sales Rep Answers”. Success by the
Sales and Manufacturing Departments in meeting their respective departmental Key Performance Indicators will
help the company meet its overall KPI'. (emphasis added)
(Source: <http://management.about.com/cs/generalmanagement/a/keyperfindic.htm>, accessed 6 May 2011).
47
One of these quantitative indicators is the Overall Equipment Effectiveness (OEE), a set of metrics
that indicate the overall utilisation of facilities, time and material for manufacturing operations.157 It
is closely related to the Total Effective Equipment Performance (TEEP). One can also measure the
Cycle Time, i.e. 'the total time from the beginning to the end of (the) process, as defined by (the
company) and (its) customer. Cycle time includes process time, during which a unit is acted upon to
bring it closer to an output, and delay time, during which a unit of work is spent waiting to take the
next action'.158 Finally, estimating a rejection rate159 may be of interest for the benchmarker.
Finally, these indicators constitute a non-exhaustive list160 of what processes can be measured and
what metrics should be sought. It is not possible to give a formal list of all indicators that could be
measured because there is no such list. 161 Indicators will vary from one industry to another.
Moreover, benchmarking does not only relate to classical manufacturing data. It also aims at
evaluating less measurable processes or simply at discovering new organizational methods.
Yet, there is one thing for sure: managers and lawyers disagree on the legitimacy and benefits of
conducting benchmarking studies. We want now to confront both arguments before trying to
reconcile benchmarking and competition law (in Chapter III).
157Source: <http://www.stabilitytech.com/lean_measure>, accessed 6 May 2011.
158 Source: <http://www.isixsigma.com/index.php?option=com_glossary&id=183&Itemid=228>, accessed 6 May
2011.
159The rejection rate is the percentage of manufactured parts that are rejected for a given period of time or an amount
of pieces.
Calculation: RR= (Rejected pieces/Processed pieces) x 100.
160See Figure 3 for a non-exhaustive list of traditional metrics that can be measured at the occasion of a benchmarking
exercise. Note also the examples given by BR Henry in 'Benchmarking and Antitrust', Antitrust L.J. 62, p. 484:
'Competitive performance can be measured along such lines as quality standards, costs, prices, financial ratios,
products, revenues, operating practices, strategy, logistics, management techniques, customer service, reliability, and
responsiveness to the market'.
161On leanyourcompany.com, we can read the following: '(…) there is not a one size fits all panacea – performance
metrics are not a cookbook that can be followed. Creative strategic thinking is required in order to develop an
effective
performance
metric
system
with
no
two
organizations
are
alike'.
(Source:
<http://www.leanyourcompany.com/methods/Value-based-performance-metrics.asp>, accessed 6 May 2011).
48
(More) 'Traditional' Metrics
(More) Value-added Metrics
→ focused on the business itself
→ focused on the end-user
Sales Turnover
Lead Time
Staff Turnover
Schedule Adherence
Actuals v Budget
Defects/Errors
Percentage of downtime
Project completion milestones
Material Cost of Sale
Customer Satisfaction
Sales Volume/ Order Intake
Productivity Ratio
Inventory Turnover
Figure 3: Traditional and Value-added metrics that can be measured during a benchmarking
exercise. 162
162 Source: <http://www.leanyourcompany.com/methods/Value-based-performance-metrics.asp>, accessed 6 May
2011.
49
Section 3: Why do economists and lawyers disagree?
§1: Managerial viewpoint
From a managerial viewpoint it is clear that benchmarking can greatly help a firm improve its
working organization and eventually increase its market value.
In its seminal book: ‘Benchmarking – The search for industry best practices that lead to superior
performance’, Robert C. Camp defines five benefits that can be derived from benchmarking.163 We
describe them briefly in turn.
Thanks to benchmarking companies can meet [their] customers' requirements. When customers
complain, firms may turn to benchmarking in order to uncover that what they deliver has to be
adapted to please their clients. However, benchmarking can also be used in advance, in order for
companies to foresee their clients' needs.
Benchmarking can also help establish effective goals and objectives and to give companies an
external focus (on the best of the industry) that will help them improve their internal processes.
True measure of productivity is also provided through benchmarking in the sense that 'the
organization understands its strengths, recognizes its weaknesses, and knows how the external
world performs those practices which require modification better'.164
Becoming competitive is achieved thanks to a thorough analysis of both competitors (within the
same industry) and non-competitors (best-in-class from other industries that can teach the
benchmarkers some valuable lessons). With such an analysis, one can become aware of the costs
and processes of its rivals.
Finding Industry best practices can prove an efficient way to implement processes that own staff
would feel suspicious with. This is referred to as the 'non-invented here' syndrome.165 Indeed, it
may be easy to reject (new) practices that have never been implemented within one's company, but
it is much more complicated to negate practices that have proved efficient elsewhere.
Benchmarking can also uncover techniques that are new within a different industry and adapt them
in order to implement them into one's industry.
163See RC Camp, Benchmarking: The search for industry best practices that lead to superior performance, (American
Society for Quality, 1989).
164See RC Camp, supra at 163, p. 32.
165Ibid, p. 34.
50
Finally, we wanted to summarize the beneficial aspects of benchmarking by quoting ML Steptoe,
the former Acting Director of the US Bureau of Competition:
Legitimate benchmarking has a fundamentally pro-competitive goal: to increase productivity. Each
firm, of course, normally carries out its own search, formal or informal, for the most efficient
means of conducting each facet of its business, drawing as effectively as it can on the experience
and education of all of its employees. But each firm's pool of such information is relatively limited,
and its attempts to experiment with alternative approaches may be costly and may often result in
disappointment. Benchmarking can be seen as a means for greatly enlarging this information pool
and reducing the need for experimentation by identifying those approaches that have already
demonstrated their effectiveness through someone else's trial and error. Put more succinctly,
benchmarking can allow firms to avoid the time and effort of “reinventing the wheel” that someone
else has already invented. And, all else being equal, industries made up of highly efficient firms
will be more competitive, and deliver more benefits to more consumers than industries made up of
firms stumbling and fumbling in the dark. (emphasis added)166
§2: Legal viewpoint
Despite the recent Guidelines of the European Commission that dealt with benchmarking to a
certain extent, the phenomenon is still poorly documented from a legal perspective. 167 This is
surprising if we think that it has exponentially developed over the past two or three decades.
However, when lawyers concern themselves with the study of benchmarking, they tend to see it
with a wary eye.168 If the obvious benefits stemming from it advocate against the use of this tool for
166 See ML Steptoe, 'Competition and Collaboration: New Issues, New Insights', Prepared Remarks before the
Commission Board, 1995 Antitrust Conference: ‘Antitrust Issues affecting Today's Economy’, 2 March 1995, para.
6-7.
167One of the few examples (from the US though) can be found in JR Loftis, ‘Benchmarking and Statistical Data
Exchanges: How to Do It Safely’ in Trade Associations and Antitrust – A Practical Guide, ABA Section of Antitrust
Law, Chicago (IL), 28 June 1996, p. 2. The author refers to a 1957 case from the United States Court of Justice:
United States v Nat'l Malleable & Steel Castings Co., 1957 Trade Cas. (CCH) ¶68,890 (N.D. Ohio 1957) aff'd per
curium, 358 US 38 (1958).
There we read that these activities (that resembled benchmarking in the sense we described it -- in this case sites
visits and exchanges of cost data) had been deemed legal by the Court. Para. 596:
'I don't believe or find that these defendants reciprocated cost information to get prices up, as part of an illegal
combination at all. I think they did it to check costs with each other so that they could get their costs down (...)
I find that plant visitation was all for the same ultimate purpose, to improve their work, to observe new machinery,
to observe new methods (…)
I find getting costs down by either of these methods of imitating the other fellow to cut costs or learning more
efficient methods to better compete with him ultimately keeps prices down, too'.
168See ML Steptoe, supra at 166, at para. 9-10, cited in JR Loftis, supra at 167. The author expresses this fear in the
following terms:
51
collusion purposes, less concerted outcomes can still flow from this extra amount of information
about one's competitor.
Moreover, benchmarking, by its very purpose, aims at reducing the uncertainty that produces
competitive rivalry. We already discussed the advantages of having a more transparent market in
order to lessen the degree of competition.169
While it may be justified (and cleared by a Competition authority) 170 to exchange information
regarding certain aspects of a production chain (average time to manufacture an item...), there
seems to be no valid reason that would justify exchanging information on prices and
pricing/cost/marketing strategies.171
In addition, there is one aspect of benchmarking that leaves lawyers more than sceptical. As noted
by Loftis: 'If a firm has a more efficient way to produce something, it will earn rents on its superior
method of production'.172 Thus, why would a competing firm (a rival- that is more efficient than the
team wanting to benchmark it) want to exchange its knowledge with someone else? One has to
consider that if the precious knowledge of the best-in-class firm is being disseminated, this firm will
lose its competitive advantage and will not be able to price at the same level anymore. Obviously,
this firm needs to get something in return. It may be a new piece of data that will allow it reach a
further level of efficiency, or the conclusion of an (explicit or implicit) agreement upon which both
firms will agree to collude to maintain high prices.173
'(…) informal sidebar meetings between opposite numbers from the two companies might result in a wink and a
handshake to make life easier for both'.
169See M Grillo, 'Collusion and Facilitating Practices: A New Perspective in Antitrust Analysis', European Journal of
Law and Economics 14, 2002, p. 162 for a discussion on how information exchanges increase market transparency
and 'rule away the possibility for firms of making independent decisions'.
170See ML Steptoe, supra at 166, at para. 6. The author remarks that exchanging information on 'subjects such as
discrete manufacturing processes, quality control, billing and collection, inventory control, order fulfilment,
maintenance procedures and waste control (...) seems relatively unlikely to result, of itself, in an anticompetitive
increase in price or decrease in output'.
171See ML Azcuenaga, supra at 155, p. 23. Readers are referred to Chapter I, Section 3, para. 1 for a discussion on
possible benefits stemming from price exchanges.
172See JR Loftis, supra at 167, p.13.
173 It will also be easier to conclude such an (tacit) agreement if the meetings between firm's management are
conducted under the pretext of benchmarking.
52
Yet, this does not mean that benchmarking will be deemed illegal from the outset.174 We will later
develop on the precautions, firms have to take, in order not to be caught by Competition authorities.
It is nevertheless interesting to note that such authorities have already been willing to authorize
genuine efficiency-enhancing agreements as demonstrated by the US Federal Trade Commission in
the 1984 Re General Motors Corporation case.175
174On the US side, see the Maple Flooring Ass'n v United States case, 268 US 563 (1925) where the Supreme Court
(surprisingly) found no breach of the Sherman Act.
The Court notably said that: para. 563: 'Competition does not become less free merely because the conduct of
commercial operations becomes more intelligent through the free distribution of knowledge to all the essential
factors entering into the commercial transaction'. It also cites the 'consensus of opinion of economists and of many
of the most important agencies of Government that the public interest is served by the gathering and dissemination,
in the widest possible manner [of industry data] because the making available of such information tends to stabilize
trade and industry, to produce fairer price levels and to avoid waste which inevitably attends the unintelligent
conduct of economic enterprise'.
175Re General Motors Corp., 103 FTC 374 (1984) where the FTC declared that GM's benchmarking study conducted
on Toyota was pro-competitive.
53
54
Chapter III
Benchmarking as a pro-competitive tool that increases companies' economic
performance
Section 1: What features of a benchmarking exercise are likely to pose problems with
regards to EU Competition Law?
When assessing an information exchange agreement (thus also a benchmarking study), the
Commission will pay attention to the characteristics of the market where the exchange is being
conducted and the characteristics of the information exchange itself.
We already discussed in great length the impact of an oligopolistic market structure on the
likelihood of collusion. Because benchmarking can be conducted within any type of industry we
will not develop on that aspect within this section. Rather, we want to show that there are certain
benchmarks that are suspicious in a Competition Law perspective. To that end we will rely on the
criteria set by the Commission in its 2010 Guidelines on Horizontal Cooperation Agreements
(HCA).176
§1: Benchmarking needs strategic information
In the eyes of the Commission, strategic information is 'data that reduces strategic uncertainty in the
market'. 177 This category is relatively broad because it encompasses (among others) prices,
customer lists, production costs, quantities, turnover, sales, capacities, qualities, marketing plans,
risks, investments, technologies, R&D programmes...
The aim of benchmarking is to collect strategic information that will show how a company manages
to perform so well. In that sense it has to rely on core indicators. If it is true that benchmarking is
not about exchanging prices or pricing policies178 nor that it aims at sharing marketing plans or
customer lists, it is, nevertheless, quite likely that information exchanged will relate to production
176Ibid at 32.
177Ibid at 32, at para. 86.
178Such information exchanges are strictly out of question for benchmarking specialists. See for instance RC Camp,
supra at 163, p. 117: 'Information on prices, pricing policies, marketing strategies, marketplace activities and
customer information is absolutely inappropriate'.
55
costs, capacities or qualities. The list is of course open-ended and we tried to provide further
example in the previous chapter. However, it is clear that strategic data is sought.
§2: Benchmarking is likely to rely on non-aggregated information
We mentioned the existence of different types of benchmarking. An important distinction is the one
between collaborative and competitive benchmarking (that are both outwards-oriented).
In collaborative benchmarking, firms agree to exchange information between themselves and often
rely on a third party to gather data, aggregate it and issue a final report that could be understood as a
sort of 'general statistical information'.179 In that sense, risks of collusion seem relatively low and
the Commission should not be particularly concerned with such studies.
However, in competitive benchmarking, the number of firms involved can be as little as two (the
benchmarking firm and its target), that is to say that information will be individualized and not
aggregated. Such individualized information will be seen critically by the Commission. At the same
time, it does not mean that a per se prohibition of non-aggregated information exchange agreements
would be appropriate. Indeed, one has to assess the specificity of each agreement (type of
information exchanged...)
§3: Benchmarking is only relevant with recent data
In order to be able to assess, for instance, the efficiency of a supply chain, one needs to be in
possession of both previous and current data. Indeed, it is necessary to observe the evolution of a
set of indicators, such as delivery times or the reactivity of the after-sales support.
At the same time, we know that the Commission is very much concerned with the exchange of
current data as this fosters the understanding of a competitor's behaviour on the market and helps
monitor deviations from a (potential) collusive outcome. 180 We will come back to this policy
dilemma in the last section of this thesis.
179We rely on the notion used by the ECJ in the VNP/COBELPA case, supra at 61.
180See the 2010 Guidelines, supra at 32, at para. 90.
56
§4: Benchmarking is conducted on a frequent basis
The very purpose of benchmarking is the perpetual amelioration of a firm's internal processes. This
makes a conscientious company wanting to conduct benchmarking studies on a regular basis, to be
able to remain competitive. 181 In that sense, it is tempting to exchange potentially efficiencyenhancing information with competitors on more than one occasion. Yet, companies are aware of
the potential dangers of such behaviour. In that sense, they are likely to switch partners over time.
This goes towards a reduction of the likelihood of collusion but still does not render benchmarking
harmless. In fact, companies will be able to create a better image of the overall market that, piece by
piece, will provide them with a precise idea of how their main competitors are behaving. Obviously,
the risk is lower if the market is particularly fragmented.
§5: Benchmarking is not public
Finally, let us mention that benchmarking is not often conducted in public. This applies to the data
exchanged that is normally not publicly available and will also not be disclosed afterwards. This
also applies to the agreement itself that may be limited to certain firms.
Indeed, there are no incentives for firms to spend a considerable amount of money to study their
competitors if the information is then made available to everybody on a free (or very cheap) basis.
However, the Commission seems very concerned when it comes to non-public agreements in that it
refers to the notion of genuine public availability of the data, described in the following terms:
For information to be genuinely public, obtaining it should not be more costly for customers and
companies unaffiliated to the exchange system than for the companies exchanging the
information.182
Moreover, the agreement will seem even more suspicious if it was not open to all market players.
Indeed, it is assumed that the more parties that take part in the agreement, the less likely it will be
for firms to come to a collusive outcome.
181 See the statement from PwC-Saratoga at <http://www.saratogapwc.co.uk/faq.html>, accessed 9 May 2011:
'Measurement and benchmarking is an iterative discipline and must not be treated as a ‘one-off’ exercise. The value
is greatly increased over a period of time, as clients develop their own portfolio of metrics, trends and target setting
and focus on the identification and prioritisation of actions'.
182See the 2010 Guidelines, supra at 32, at para. 92.
57
Benchmarking, by its very purpose and some of its features is thus likely to raise competition
concerns. In the next section, we will try to reconcile both economic and legal arguments in order to
come to a device that would highly improve firms' efficiency while restraining at its minimum the
risk of collusion.
Section 2: Reconciling benchmarking and Competition Law
After having stated that certain features commonly found in a benchmarking study have the
potential to threaten competition, we now want to emphasize the potential for reconciliation
between benchmarking and Competition Law.
These 'guidelines' do not aim at being exhaustive. This is not even possible and could only be
realized on a case-by-case basis. Rather, they will give some broader indication of which sensitive
aspects a firm has particularly to pay attention to. We draw extensively on the works of the
Pillsbury Winthrop Shaw Pittman LLP,183 JR Loftis,184 and K-U Kühn.185
§1: Advice for firms
Before starting any benchmarking effort, firms should go through a series of steps that, if correctly
completed, will greatly limit competition threats or will, at least, help companies benefit from an
article 101(3) TFEU exemption.
First, it is of the foremost importance to train staff dealing with benchmarking so that it is able to
assess if its behaviour is legal or, in case of doubt, contact the antitrust department of the company.
Second, firms should engage in benchmarking for (compelling) competition-enhancing reasons.
These reasons should be documented in an appropriate and extensive way. Finally, a schedule of the
tasks that have to be completed should be issued and every unit should stick to it. Any deviation
from it would undoubtedly attract the Competition Authority's suspicion.
183See Pillsbury Winthrop Shaw Pittman (PSWP) LLP, 'Benchmarking and the Antitrust Laws'. PWSP is a law firm
with practice in business and technology law. Source: <http://library.findlaw.com/1997/Jul/1/131309.html>,
accessed 18 February 2011.
184See JR Loftis, supra at 167.
185See KU Kühn, supra at 66.
58
Let us now turn to the substance of the benchmarking study. Below is some advice that would help
a firm address the main issues that could stem from its benchmarking effort:
−
Little antitrust risk is involved when benchmarking is conducted among non-
competitors and/or when each firm's market share is too low to credibly trigger collusive
outcomes. However, if firms are not in this situation (e.g. direct competitors, high market
shares),186 they should try to invite as many participants as possible in order to reduce the
likelihood of collusion (it is assumed that collusion is harder to sustain when firms are
numerous). Note that this is only possible if the market is not strictly oligopolistic. The
underlying ratione here is that if all firms can participate in the benchmarking study, there
cannot be any foreclosure. At the same time, if all firms participate in the benchmarking
exercise, the risk appears that they will align their behaviours, thus limiting innovation in a
game-theoretical perspective.
−
Furthermore, attention has to be paid to potential barriers to entry, product
fungibility, price elasticity of demand and history of antitrust concern within the industry.187
−
The exchange or discussion about current or prospective price(s) 188 or output
data189 is totally inappropriate. Such data will inevitably raise concerns about a possible
agreement to fix prices or production levels and does not fit into the philosophy of
benchmarking.
−
Even if exchanges of information about costs are not illegal per se, the risk that they
186One can use the HHI index and take as a guideline the figures suggested when assessing a merger between two
firms. In a market with a HHI under 1000 very little competition concerns are raised.
Where si is the market share of firm and N is the number of firms.
187See JR Loftis, supra at 167, pp. 20-21. These criteria have been discussed in greater detail in Chapter I, Section 2 of
this thesis.
188See CB Simpson, ‘Benchmarking: How to Reduce the Risk of Getting the Facts’, The Corporate Counsel Quarterly
12, April 1996 at para. 12 where the author notes that 'there is seldom, if ever, any need to exchange any information
about prices to achieve the pro-competitive ends of benchmarking'.
189See PWSP LLP, supra at 183, p.10.
59
will be deemed anticompetitive greatly increases as 'the percentage of the product's
price that the costs under consideration represent increases'. 190 Indeed, firms know the
public price of their rivals' products. If they are able to get a precise idea about the
product's cost structure (that is easier if percentage increases) then it will not be very
hard for them to estimate their competitors' margin.191 With such information at hand, it will
be easier to predict future prices, taking into account the evolution of raw materials for
instance. Sharing information about costs may also facilitate bid rigging.192
−
The Commission already suggested that the recourse to a third party acting as data
aggregator would trigger less competitive concerns.193 To be sure, one should try to make
use of a consultant or trade association that is not part of the industry. It should also not be
'affiliated to industry members'.194
−
Note that data should not allow firms to identify their competitors directly or
indirectly. Simply masking the names of the companies 195 seems insufficient because
they could still be inferred by recouping different data. Aggregation leaves aside the
specificity of the data while giving firms enough information about their industry average to
improve their processes.196
−
It is assumed that a company has not interest in sharing/receiving historic (and thus
non relevant) data and that its focus will be on current metrics that document present
processes. Nevertheless, the firm should forgo any kind of prospective data or production
190Ibid.
191PSWP LLP recalls that the Antitrust Division of the Federal Trade Commission is particularly concerned with
exchanges of information that relates to costs representing over twenty per cent of a product's price.
192Bid rigging is an 'illegal conspiracy in which competitors join to artificially increase the prices of goods and/or
services offered in bids to potential customers'. (Source: <http://www.businessdictionary.com/definition/bidrigging.html>, accessed 7 May 2011).
193A similar reasoning has been held in the United States. See for instance FTC/DOJ, '6. Statement of DOJ and FTC
Enforcement Policy on Providers Participation in Exchanges of Price and Cost Information', Statements of Antitrust
Enforcement Policy in Health Care, 1996.
194See PWSP LLP, supra at 183, p.11.
195Ibid.
196 See KU Kühn, supra at 66, p. 191. Kühn writes that: 'a minimal amount of aggregation of data on which
performance schemes are based will generally be optimal'.
60
plans that could be interpreted as a means to facilitate collusion.197
−
An acceptable balance has to be struck between (potentially efficiency-enhancing)
frequent benchmarking among competitors that is likely to raise concerns about collusion
and sporadic benchmarking exercises that will be seen with more sympathy but will not
enhance efficiency to the same extent.
−
When meeting with each other, companies' representatives (at any level) should
agree on an agenda, and preferably write down the object of their discussion and stick to it.
Azcuenaga suggests that a record of the meetings is made to avoid suspicion. 198 199 It would
also be wise not to reveal to much information to a single person or group. That is that
information should be compartmentalized so that division X (of company α) has only
knowledge about process 1, but not about process 2 (that is in the hands of division Y of the
same company).200
−
To avoid the risk that some firms complain that they were not offered the chance to
take part in the benchmarking study, benchmarkers should always offer them to
participate or make results available to them on reasonable terms. 201 As a matter of
course, participation in a benchmarking study should never be mandatory. It is not
foreseeable that the membership in a trade association is being conditioned by an
agreement to share data.202
−
Finally, the aim of benchmarking is not to make recommendations to each other.
Obviously, conclusions will be drawn internally and it should not lead to a 'uniform set of
197We nevertheless want to recall that this kind of information has often be qualified as 'cheap talk', that is non-binding
intentions that does not allow a company to base its strategy on. Yet, it is still seen cautiously by the “orthodox”
doctrine (See e.g. the Re Cimbel case, supra at 62).
198See ML Azcuenaga, supra at 155, p.23.
199Even if the participants would still be able to press the 'stop' key when it comes to sensitive discussion about pricefixing...
200See JR Loftis, supra at 167, p.25. Loftis observes that 'while providing line production managers with information
on the production costs of a benchmarking partner may enhance efficiency, it is difficult to justify providing the
same information to managers of staff involved in setting prices'.
201See PWSP LLP, supra at 183, p.11.
202See JR Loftis, supra at 167, p.27. See also United States v American Linseed Oil Co., 262 US 371 (1923).
61
“best” methods, practices or products'.203 For the same reason, it is not recommended to
share benchmarking studies with other firms.204
§2: Advice for the Competition Authority
Within the European Union, the Commission has made a great step towards a ‘more economic
approach’ with the issuance of the new Guidelines on Horizontal Cooperation Agreements.205
These Guidelines deal with information exchange agreements in a very detailed way. Between 2001
and 2010, the Commission has become aware of the economic importance of benchmarking and is
now willing to recognize its beneficial aspects and to look at the scheme in more details, in order
not to prohibit it from the outset.
We nevertheless think that there are still some aspects of the Commission's policy that could be
improved, i.e. it would benefit from both less legal dogmatism and more legal certainty. We want
now to pinpoint certain aspects of this policy that could be improved.
−
First and foremost, a per se prohibition of certain types of information exchange
agreements will never be totally satisfactory and one should always look at the precise
characteristics of the agreement at hand and at market data. 206
distinction
between
restrictions
of competition 'by object'
207
In that sense, the
and
restrictions
of
competition 'by effect' is somehow at odds with the recent effects-based approach advocated
by the Commission. 208 Nevertheless, the Commission cannot depart from the law and
changes can only come from the Legislator on that aspect.
−
It has been suggested to prohibit individualized information exchange about past
prices and quantities, except in the banking and insurance sector, that suffers from
203See JR Loftis, supra at 167, p.26.
204See BR Henry, supra at 14, p.509.
205See the 2010 Guidelines, supra at 32.
206This is also advocated by B Moldovanu in KU Kühn, supra at 66, p.201.
207However we would welcome a per se authorization ('safe harbour rule') of agreements entered into by firms with
very low market shares. The current de minimis regulation does not expressly apply to information exchange
agreements if not conducted together with an ad hoc horizontal co-operation agreement.
208See ECLF Working Group on Horizontal Agreements, 'Comments on the draft guidelines on the applicability of
article 101 of the Treaty on the Functioning of the European Union to Horizontal Co-operation Agreements',
European Competition Journal 6, No.2, August 2010, p.508 where the Forum advocates for a set of clear-cut rules if
this distinction is to be used.
62
asymmetric information.209 The aim is to allow enough flexibility while securing a sufficient
degree of legal certainty. Such a suggestion goes to the right direction.
−
Concerning publicity of data, the Commission refers to the 'genuinely public' notion
that it relates to a cost benchmark ('For information to be genuinely public, obtaining it
should not be more costly for customers and companies unaffiliated to the exchange system
that the companies exchanging the information').210 This criterion is somehow too restrictive
and too vague. One could rather imagine a scheme where data would be available on a
reasonable cost.211
−
It is also assumed that ‘historic data’ would not trigger competitive concerns.212 Yet,
many observers note that there is no clear-cut rule in order to assess whether data is
historic or not. In the UK Agricultural Tractor Registration case, it has been said that data
that is more than one year old is likely to be seen as 'historic' data. 213 Nevertheless, the
Commission uses a more ambiguous formula in paragraph 86 of the 2010 Guidelines where
it states that data that is 'several times older than the average length of contracts in the
industry' can be considered as 'historic'. The ECLF Working Group on Horizontal
Agreements rightfully notes that :
(…) as many industries operate with annual contracts, and assuming that ‘several’
must be taken to mean more than two, the proposed wording would have the effect
of considerably broadening the current ‘rule of thumb’ suggested by the
Commission's previous decisions.214
209Ibid.
210See the 2010 Guidelines, supra at 32, at para. 92.
211See Wilmer Cutler Pickering Hale and Dorr (WCPHD) LLP, 'DG Comp consultation regarding the Commission's
review of the rules applicable to horizontal cooperation agreements', July 2010, available at:
<http://wilmerhaleupdates.com/ve/85L6027o61l73ha927/stype=click/OID=1107617115178/VT=0>, accessed 9
May 2011, p.4: 'The key point appears to be that the data should be (reasonably) available on equal terms to all
market participants'.
On the same point see also the example given by the ECLF Working Group on Horizontal Agreements, supra at
208, p. 511: 'Frequently, third-party sources such as industry analysts make a significant amount of market
information available to undertakings that will pay for it. Such information is not “costless” to obtain, but is
generally regarded as being publicly available'.
212See the 2010 Guidelines, supra at 32, at para. 90.
213See UK Tractors case, supra at 52.
214See ECLF Working Group on Horizontal Agreements, supra at 208, p. 511.
63
−
Finally, when data is aggregated, no competitive concern should be raised. Yet, the
notion of ‘aggregated data’ would benefit from a more precise definition. Indeed, it is not
stated 'how aggregated' the data should be in order to be deemed acceptable for the
Commission.215
215The ECLF Working Group on Horizontal Agreements, supra at 208, p. 511, mentions a 'generally understood rule of
thumb' according to which data from more than three market players would be deemed aggregated enough. An
economic assessment of this rule would be welcomed.
64
Conclusion
In this thesis we investigated benchmarking as a business phenomenon that is likely to pose
problems with regards to (EU) Competition Law. The specific focus we adopted is appropriate
because legal aspects of benchmarking are still poorly documented either by the legal or the
managerial literature.216 We believe that the talks about an incompatibility between benchmarking
and the antitrust laws are simply the result of a lack of understanding of the aims of both notions.
In order to shed light on the potential for reconciliation between these two aims, we carefully
reviewed the provisions of EU law (and the relevant soft law instruments) that deal with
information sharing (and thus benchmarking). We then assessed benchmarking in a Competition
Law perspective and eventually suggested some advice for firms in order to reduce the risks of
competition issues.
Our main findings were that benchmarking should be a carefully planned exercise done by a team
aware of the (main) antitrust regulations. This implies paying attention to certain features of the
information exchange that relate to both the benchmarking partner and the benchmarking study.
Among others, it should be kept in mind that exchanges of price information or output data are
totally inappropriate. Sharing costs data (especially if current or recent) will also be seen critically
by the Commission. Moreover, aggregated information should be preferred to individualized data
and, if possible, the collection and aggregation task should be given to a third party.
We also advocated minor alterations to the Commission policy on information sharing. Our main
concerns were related to the notions of 'genuinely public', 'aggregated' and 'historic' data. In that
respect we would welcome an “even-more economic approach” that simultaneously increases legal
certainty and economic ratione. To that aim, the aforementioned concepts should be more carefully
defined, possibly by providing thresholds.
We nevertheless believe that the Commission is slowly going in this direction as can be inferred
from the recent developments of its policy. Indeed, the last decade has seen the appointment of a
Chief Economist at DG Comp (currently Kai-Uwe Kühn) (2003), the adoption of the SIEC-test in
the area of Merger Control (2004) and the New Guidelines on Horizontal Cooperation Agreements
216Not surprisingly the US legal doctrine seems to have a better understanding of this phenomenon that appeared there.
65
(2010) (the list is not exhaustive and open-ended).
The Guidelines on HCA have especially been a giant step forward in that they aim at assessing the
concrete effects of an agreement on the market and forego most of the per se prohibition rules. At
the same time they provide legal certainty in that they lay down objective criteria that can be used
by firms in order to assess the likelihood that the agreement they are entering into could breach EU
Law. It is of the foremost importance to stick to this analytical scheme: alterations should only be
seen as a means of improving legal certainty and rendering economic analysis even more
transparent.
Another aspect of the ‘more economic approach’ that should be reinforced is the possibility to claim
efficiencies. In that respect, benchmarking is a remarkable tool because it provides evidence of
efficiencies that benefit both businesses and consumers. We hope that a better understanding of this
device will convince public authorities of the legitimacy of selective reliefs from (sometimes) too
strict competition rules. Once this will be accepted for genuine benchmarking efforts it is
foreseeable that such reasoning will flow into other areas of Competition Law. Inspiration could be
taken from the United States that engaged earlier into a 'more economic approach' to competition,
preferring a 'rule of reason' where applicable.
As a final point, it could be said that the Commission is now in possession of a powerful device (the
HCA Guidelines) that should prove sufficient to satisfactorily address benchmarking issues in the
next years. If this device is wisely used, there is no urgent need to develop further apparatuses or to
inquire into the benchmarking industry that is now fairly well understood.
66
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