Competition (Jersey) Law 2005: Block Exemptions: Approval in Principle

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A decision made 29 July2016:

Decision Reference: MD-C-2016-0090
Decision Summary Title :	Competition (Jersey) Law 2005 – Block Exemptions		Date of Decision Summary:	27/07/2016
Decision Summary Author:	Director Strategic Development		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Block exemptions development		Date of Written Report:	27/07/2016
Written Report Author:	Director Strategic Development		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Competition (Jersey) Law 2005 – Block Exemptions
Decision(s): The Assistant Chief Minister approved in principle the development of block exemptions under the Competition (Jersey) Law 2005 in the four areas recommended by the JCRA: fuel forecourt distribution agreements; motor vehicle trade agreements; insurance agreements; franchise arrangements. The Assistant Chief Minister notes that the block exemption on fuel forecourt distribution agreements will be subject to close scrutiny. Proposals will be subject to consultation with colleagues in Treasury and the Infrastructure Department at the appropriate time because of long standing concerns about the operation of the fuel markets. * * The Assistant Chief Minister notes that he has an interest in lease income from a retail fuel outlet, which is limited to a potential indirect conflict of interest. It is not possible to say at this early stage whether this represents a conflict of interest. However, should a conflict of interest arise then consideration will be given as to how that should be managed.
Reason(s) for Decision: Competition Law prohibits certain types of arrangements that have the object or effect of hindering competition in the supply of goods and services to an appreciable extent. The Minister can Order that some types of arrangement are exempt from this general prohibition in order to overcome the problem of having to notify all agreements that might need to be cleared by the Authority. Exemptions would apply to agreements where it is clear that the classes of agreement would not be harmful to competition, or because they offer substantial benefits to consumers and businesses that outweigh any potential harm. Block exemptions can improve legal certainty for businesses, reduce the overall cost of competition compliance for business and enable the Competition Authority to focus its resources in areas where it can best contribute to protecting economic development.
Resource Implications: There are no additional resource implications. Staff time will be required within government as well as an allocation of drafting time. The JCRA will need to devote some resource from within its competition law budget to developing detailed proposals and drafting instructions with the Chief Minister’s Department.
Action required: Notify JCRA of the decision and request a detailed proposal for the block exemption framework.
Signature:		Position: Senator P F C Ozouf Assistant Chief Minister
Date Signed:		Date of Decision (If different from Date Signed):

Competition (Jersey) Law 2005: Block Exemptions: Approval in Principle

WRITTEN REPORT

Block exemptions development

27/07/2016

The Competition (Jersey) Law 2005 prohibits undertakings from entering into arrangements that hinder competition to an appreciable extent. (Article 8)
Article 9 enables the Authority to exempt on a case by case basis agreements that would otherwise fall foul of the general prohibition in Article 8.
Article 10 enables the Minister to make an Order exempting classes of arrangements from the general prohibition, these are known as “block exemptions.”
At present Jersey has no block exemption regime in place. In part, this is because the Competition (Jersey) Law is relatively new. In the early stages of the Law’s development and operation it was believed that block exemptions should not be put in place until better experience enabled block exemptions to be developed that were suitable to Jersey.
The JCRA has undertaken some initial work on block exemptions based on their experience of applications to exempt agreements on a case by case basis.
Oxera advised in its review of the Jersey competition framework:

“In addition, we understand that in order to overcome the problem of having to notify all agreements, CICRA has recently embarked on a consultation on the merits of introducing block exemptions, which the law allows and which are common within Europe. These exemptions would apply to agreements where it is clear that they would not be harmful to competition, or because they offer substantial benefits to consumers that outweigh any potential harm. CICRA notes that block exemptions would allow for more effective use of its limited resources, and would reduce the resource costs to parties seeking individual exemptions. CICRA notes that, in its view:

the introduction of a small number of block exemptions which are limited in their scope would substantially improve the operation of competition law in both Guernsey and Jersey and offer increased certainty for businesses in the Channel Islands

Oxera would recommend that the block exemptions along the lines suggested by CICRA in its consultation document be introduced.”[1]

Article 10 of the Competition (Jersey) Law sets out a process which will need to be formally observed once and Order is drafted, although in this case the process has been initiated by the JCRA.

10 Block exemptions

(1) The Minister may, after consulting the Authority, by Order exempt from Article 8(1) a class of arrangements to which that Article would otherwise apply.

The JCRA recommendation contained in its letter of 30 July 2015 is attached. This sets out four areas for potential block exemptions:

A copy of the JCRA’s consultation document on block exemptions is also attached.

A further note of clarification from the JCRA of May 2016 is attached.

It would be necessary to ensure that there is no harm from any potential block exemption in key markets such as fuel. However, the JCRA does not think that the existence of a block exemption on fuel distribution agreements would be harmful because it would set thresholds and criteria so that only compliant agreements would be exempt.
It will be important that the block exemptions are carefully drawn to take into account the nature of markets in Jersey. The JCRA should be invited to submit more detailed proposals that could form the basis of drafting instructions for consideration of the Chief Minister’s Department.

Recommendation

The Assistant Chief Minster is recommended to agree in principle that block exemptions are developed in the four areas that the JCRA recommend and to ask the JCRA to provide detailed proposals.

[1] A review of the Jersey regulatory and competition framework, pg. 58, 16 November 2015, Oxera