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The Danish Federation of Small and Medium-sized Enterprises - Concerted practice (cost index for auto repairers had the restriction of competition as the object)

29. marts 2006

4/0120-0389-0003/FI/JG The Council Meeting 29 March 2006

On 29 March 2006 the Danish Competition Council adopted a decision concluding that the Danish Federation of Small and Medium-sized Enterprises hereinafter referred to as ‘DFSME’, in Danish ‘Håndværksrådet’) had the object, in restraint of competition, of establishing a concerted practice through the introduction of a cost index for auto repair.

The DFSME is an umbrella organisation for various trade organisations and crosstrade associations. Its members operate within many different sectors, such as small industries, crafts, construction, trade and services. Among its members are the Danish organisations representing independent auto repairers.

On behalf of these, as well as the Danish organisation representing authorized auto repairers, the DFSME applied for a negative attest or an individual exemption from a cost index to be used by auto repairers when negotiating with insurance companies, which are very large purchasers of auto repair work.

Until 1998 the organisations representing the auto repairers and the organisation representing Danish insurance companies negotiated prices to be used between the auto repairers and the insurance companies. However, in 1998 the Council found this to be in violation of the Danish Competition Act. Since then, the auto repairers and the insurance companies have negotiated prices individually.

As the Danish insurance market is highly concentrated, composed of 4 major insurance entities accounting for about 85 per cent of the market while the auto repairers are mainly small and medium sized business with management and ownership coinciding, the auto repairers found the individual negotiations with the insurance companies tough. Many auto repairers, thus, (wished) for a return to the time of collective negotiating.

The DFSM, realizing that collective negotiating could not be reestablished given current competition law, thus applied for a negative attest or an individual exemption from a cost index for auto repair. The cost index weighted official indices from the government entity Statistics Denmark and indices from The Confederation of Danish Employers into a collective percentage increase to be distributed to the auto repairers before negotiating with the insurance companies. The weights assigned reflected the distribution of costs at an average auto repairer.

The DFSME stressed that the index did not have the restriction of competition as (its) the object, but was meant as a remedy for the auto repairer when comparing his own costs with the costs of an average auto repairer.

The Council, however, found that this object could have been attained by merely distributing the official indices.

The Council concluded that the introduction of cost index for auto repair had the object of establishing a concerted practice among Danish auto repairers when negotiating with the insurance companies. The Council thus found that the introduction of the index would violate section 6 (3) of the Danish Competition Act. The application of the DFSME was therefore declined.

The decision (in Danish) can be found on the webpage of the Danish Competition Authority – www.ks.dk/