11 December 2006
JCRA publishes advice on block exemptions and small business exemptions
The Minister for Economic Development, Senator Philip Ozouf has received advice from the Jersey Competition Regulatory Authority (JCRA) to maintain his position and not use his powers, under Part 2 of the Competition Law, to issue an Order to allow either a block exemption or a small undertakings exemption. This advice has been given in the context of anti-competitive arrangements.
The Minister commented: “The JCRA recommend that a further review should be undertaken once the interest in such exemptions increases. My current understanding is that only one request for a block exemption has been made in the ten months since this part of the Competition Law came into force. It is nevertheless important that I carefully consider this advice and am confident that there are no strategic issues that will be adversely affected by this position. I will let my conclusions be known by 22 December.”
The advice to the Minister is consistent with the advice given by the JCRA to the previous Economic Development Committee (EDC). At the time the committee agreed that the power to order the use of these exemptions would not be used and set a timeframe of six months to see what effect this decision had in practice.
-ends-
Notes to Editors:
1. For further information, please contact Senator Philip Ozouf, Minister for Economic Development on 448824 or 07797 713 838
2. A definition of block exemptions: This is a group exemption, which automatically exempts agreements falling within its terms. The Law states that to qualify under the exemption it should be demonstrated that it
(a) is likely to improve the production or distribution of goods or services, or to promote technical or economic progress in the production or distribution of goods or services;
(b) will allow consumers of those goods or services a fair share of any resulting benefit;
(c) does not impose on the undertakings concerned terms that are not indispensable to the attainment of the objectives mentioned in sub-paragraphs (a) and (b); and
(d) does not afford the undertakings concerned the ability to eliminate competition in respect of a substantial part of the goods or services in question.
3. A definition of small undertakings exemptions: This is normally based upon a consideration of
(a) turnover, earnings, market share or similar measures; or
(b) number of employees.
4. The advice of the JCRA is:
Block Exemptions
The Minister should not make an Order for such exemptions until standards appropriate to Jersey can be developed through the JCRA’s continued consideration of individual exemption requests. While some appear to advocate the adoption of EU-based block exemption standards, the JCRA is not convinced that standards adopted for the entire EU market would be equally applicable in a small economy like Jersey.
In the ten or so months since Part 2 came into force, only one request for an individual exemption has been received by the JCRA, and this was granted. Throughout this period, the JCRA has organised seminars and issued publications explaining the Law. It plans to publish new guidelines on the Law’s application to vertical arrangements such as distribution agreements. These initiatives are all designed to help reduce the compliance burden on businesses.
Small Undertakings Exemption
The JCRA advise that the Minister should not make an Order for such exemptions because there was no compelling evidence of compliance burdens on small businesses specifically arising from Part 2 of the Law, and there is a potential risk of insulating anti-competitive conduct from the Law.
The JCRA was well aware that the main driver for the exemption was the fear of the weight of the compliance burden on small businesses. In response to the JCRA’s public consultation, however, no compelling evidence was presented to the JCRA of any such burden arising from compliance with Part 2 of the Law. As with block exemptions, the JCRA has been refining its guidelines for publication and plans to produce shorter, simpler statements on particular areas of the Law’s application. The JCRA also continues to offer confidential advice to anyone seeking it.
The JCRA’s current guideline state that an arrangement among parties with a combined market share of 25% or lower is assumed to be compliant with Part 2 of the Law – so, purely from the practical viewpoint, many arrangements among small businesses are not subject to the Part 2 prohibition, even without a specific exemption.
The JCRA also identifies the risk of potentially insulating activities that otherwise could be subject to liability under the Law. This risk may be particularly pertinent in a small place like Jersey, in which arrangements between businesses that otherwise appear ‘small’ could still have substantial adverse effects on competition, if the businesses control a large proportion of the market in question.
5. The previous advice given by the JCRA to the EDC can be found on the JCRA website
6. The EDC requested the JCRA in August 2005 under Article 6(4) of the Competition Regulatory Authority (Jersey) Law 2001 to advise on the content and form of any order which it might have been appropriate for the then Committee to issue under Article 11(1) of the Competition (Jersey) Law 2005. The Minister reminded the JCRA of the need for an updated view in July and August 2006.
7. Article 11(1) of the Competition (Jersey) Law 2005 provides that the Minister may exempt from the scope of Article 8(1) of the Law arrangements involving one or more small undertakings but requires the Minister to consult the JCRA before issuing any small undertakings exemption order. This came into force on 1st November 2005.
8. Article 11(4) of the Competition (Jersey) Law 2005 provides that any Order made under Article 11 will have no effect if the object of an arrangement is to fix prices, limit or control production or markets, or share markets or courses of supply.
gov.je