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Competition Compliance Manual

This manual reflects the views of Group Legal as well as the legal situation as of November 24, 2017.

FOREWORD BY CEES ’T HART,  PRESIDENT AND CEO 

Dear colleague,

Each and every one of us is responsible for supporting and adhering to our core values, which oblige us to conduct our business with full respect for the law. Compliance with competition laws is also part of our Code of Ethics and Conducts which applies to all of our employees. Our values are not just reminders for us to stay compliant though. They also enable us to make the right and the smartest business decisions.

Competition law is complex and, even for lawyers, a difficult area of law. The purpose of this manual is not to make relevant Carlsberg employees experts in competition law. Rather, the manual will assist you in understanding the basics of competition law and enable you to identify situations that may cause concern and where you should seek guidance from your local Legal or Group Legal.

Carlsberg is active in many markets and what applies to one market may not apply to another. Local variations of competition law apply. Therefore, you should not hesitate to reach out to your local lawyer should any questions arise on how to stay compliant with your country’s competition law.

It is critical that we conduct our business with full respect for the law, in order to safeguard Carlsberg’s integrity and legacy as a fair and valued company to our customers, business partners and the society in which we operate.

As stated in the Competition Compliance Policy, this manual is mandatory reading and I ask you to periodically review it in order to achieve our common goals. To become the most successful, professional and attractive brewery in the geographies in which we operate, requires first and foremost that we conduct our business with respect for the law!

With best regards,

Cees ‘t Hart President and CEO


WHAT IS COMPETITION LAW ABOUT?
Competition law, also commonly known as anti-monopoly or anti-trust, is about encouraging and preserving a competitive environment in which market participants are free to buy and sell products and services on the basis of how competitive they are to the benefit of consumers.

Competition law thus has as its objective to prevent competition from being undermined by anti-competitive practices, such as anti-competitive agreements between companies and the abuse of market power. In other words, competition law prohibits conduct that harms competition.

Competition is not only important to protect consumers’ welfare and foster innovation; it is also a way for us to stay at our best, ensuring that we remain at the forefront of business and constantly push the limits of our capabilities.

However, as competition law applies to all parties in the markets we operate in it can also be a tool for us to keep our competitors in check or ensure that we are not met with unfair business practices by our suppliers and in some case even from our customers.

Consequently, at Carlsberg, we not only safeguard our brand and avoid high costs by staying compliant with competition law, we also ensure that we stay at the forefront of business and continue to produce probably the best beer in the world.

If you are in doubt if something could be considered to be anti-competitive always contact local Legal or Group Legal.


CONSEQUENCES OF NON-COMPLIANCE

Competition law is important to society as a whole and it is a legal area with strict government enforcement. Companies are therefore frequently fined for non-compliance with competition rules and these fines are high. In the EU and in many other jurisdictions, fines can even be as high as 10 per cent of the Carlsberg Group’s global turnover the preceding year. It should be stressed that strict enforcement and high fines is the standard globally and competition rules must be followed globally in Carlsberg.

Furthermore, it is becoming increasingly common with personal fines for involved employees and in certain markets there is even the risk of imprisonment for involved employees. In addition, it is becoming more and more common that damage claims are raised by customers or competitors who have suffered a loss due to the competition law breach. Apart from the damage claim as such, the legal proceedings are extremely costly and can drag on for years after an already lengthy investigation by the authorities. Finally, negative media coverage could potentially cause very serious harm to two of our most valuable assets, namely our brand equity and our stock value.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” —Warren Buffett
COMPETITION LAW DOS AND DON’TS

GLOSSARY
Active sales

Sales made by actively approaching individual customers inside another distributor’s exclusive territory or exclusive customer group by for instance direct mail or visits. Or by actively approaching such customers through advertisement in media or other promotions specifically targeted at these customers.

Commercially sensitive information

Strategically important information, including, but not limited to, prices (e.g. actual prices, discounts, increases, reductions, rebates), customer lists, production costs, quantities, turnovers, sales, capacities, qualities, marketing plans, risks, plans, investments, technologies, R&D programmes and results.

Dawn raid

An unannounced on-site inspection by a competition authority with the purpose of gathering evidence of competition law infringements.

Dominant position/dominant company

Typically a company holding a market share of more than 40 percent of the relevant market. However market share threshold vary from market to market and special care must be taken when having a market share of 30 percent.

Competitors

Any company whether it be breweries, super markets, restaurants or a company selling a product actually or potentially competing with our products. It can also be a company competing in the purchase of a product or a service, such as purchasing cans, packaging material, sugar or transportation services. Geographic market The relevant geographic market consists of the area in which a company is active and where the specifics of the market can be distinguished from neighbouring geographic areas. In the brewery industry, the general perception is that markets are national in size but split between on-trade and off-trade.

Product market

A relevant product market consists of all those products and/or services, which are regarded as interchangeable or substitutable by the consumer, due to the products’ characteristics, the price and intended use. The starting point is a split between e.g. beer (in certain countries also segmented into various categories), cider, non-alcoholic beverages, carbonated soft drinks, carbonated soft drinks with coke flavour, soft drinks and water.

Passive sales

When a customer from one market on its own initiative asks to buy from a company in a different market, that company is passively selling to that customer. This cannot be prohibited.



AGREEMENTS WITH COMPETITORS, SUPPLIERS, DISTRIBUTORS AND CUSTOMERS
AGREEMENTS WITH COMPETITORS
Agreements between competitors that limit competition are in general prohibited by competition law. Agreements between competitors are typically described as horizontal agreements because the parties to the agreement are active at the same market level, e.g. two producers or two distributors of beer.

An “agreement” is not an exact legal term. It could be both written, oral or simply a common understanding between two parties to act in a certain way. Do not make the mistake of thinking that only written agreements are subject to competition law. Co-ordinated conduct that limits competition is also contrary to competition law. Parallel pricing or price signalling are examples of co-ordinated conduct, but unlawful conduct can even be established through media statements or social networks posts if a company signals to its competitors that it will raise prices.

Co-ordinated conduct that leads to or has as its objective to limit competition is contrary to competition law.

As agreements between competitors are treated harshly by authorities, it is important that we take great care not to end up in a situation where a particular conduct or an e-mail sent to a competitor could lead others to believe that we have an illegal understanding with a competitor. Appendix 1 contains an overview over the main Do’s and Don’ts and should be distributed to all employees in contact with competitors, customers or vendors.


1. CARTELS
Many people are familiar with the term “cartel”, but not all understand what the concept of a cartel actually implies. A cartel is not necessarily entered into at dim locations after normal working hours. Many cartels are simply entered into between competitors who are not aware of the fact that they are committing a serious crime when agreeing e.g. to fix prices, or to share markets or customers between them. Cartels are illegal and can result in significant fines, imprisonment and directors being prohibited from management work. Great care must be taken to avoid participating in a cartel, both knowingly and unknowingly.

Also, we must never forget that participating in trade associations or industry events where our competitors are present is a high risk activity and special care must be taken to ensure that we do not end up as a party to illegal agreements. It should be stressed that we may be found to be a party to an illegal agreement, even if we did not actually say anything during the discussions. We must therefore always actively protest against illegal discussions and agreements.

In most markets, the very existence of a cartel agreement is illegal. It does not matter if the agreement between the competitors has had an actual effect on competition, or if the agreement is never put into effect. The moment two competitors agree to e.g. fix prices or divide markets, they have violated the law.

Any proposed agreement with a competitor must be presented to local Legal or Group Legal for review and approval before it is entered into.

Because of the severe consequences, any proposed agreement with a competitor must be presented to local Legal or Group Legal for review and approval before it is entered into, except if it is based on a pre-approved standard template. Local Legal or Group Legal should also be informed about other binding or non-binding documents such as a Letter of Intent, a memo or meeting minutes involving competitors. It is important to remember that Carlsberg may be seen as a potential competitor to all breweries, even if Carlsberg and the other brewery are not currently active in the same market. Also remember that sometimes our suppliers or customers can also be competitors, such as supermarkets that produce their own beer. When dealing with a supplier or a customer that is also a competitor, remember that any communications about prices should only concern what is actually necessary for the buyerseller transactions.

Examples of agreements between competitors and conduct that is considered illegal cartel activity and which must be avoided can be found below. The list is not exhaustive.

1.1 PRICE FIXING
Price fixing is an agreement between competitors to raise, lower, or otherwise set a price or particular price range (maximum or minimum prices) and are illegal. Price fixing also includes any other parameter on which the parties might compete, such as financing terms, warranties, discounts and shipping/distribution fees.

Do NOT discuss prices or share our price lists with a competitor and never accept a competitor price list, irrespective if it is provided to you by a customer or a competitor.

You may perhaps obtain information on competitors’ commercially sensitive information from parties other than our competitors as part of your daily work. However, there are great risks connected with receiving and storing such information, and at Carlsberg we have therefore decided to prohibit employees from accepting and storing competitors’ price lists, whether they be net or gross lists, even if a customer freely hands it over to us. The reason being that Carlsberg does not want to have such price lists floating around in our systems since they will always attract the attention of competition authorities should we be dawn raided and could be seen as evidence of price signalling


1.2 MARKET OR CUSTOMER ALLOCATION
Agreements between competitors to share or divide markets or customers between them - through e.g., sales territories, assigning certain customers to particular sellers, - are illegal.

1.3 BID RIGGING
Agreements or understandings between competitors regarding prices or terms and conditions to be submitted in response to a bid request are generally prohibited. This includes agreeing not to bid.

1.4 LIMITATION OF PRODUCTION
It is illegal for competing companies to agree to stop production, or to limit this to a certain level, rather than allowing normal competitive forces to determine their independent production decisions.

1.5. JOINT BOYCOTTING
It is generally illegal for competitors to agree to boycott a particular customer or supplier or class of customers or suppliers. “Boycott” here means any concerted action or agreement between two or more competitors not to sell to or buy from a particular customer or supplier

2. CONTACTS WITH COMPETTITORS
We should refrain from conversations or communications with competitors regarding prices, costs, terms and conditions, business plans or strategies, suppliers, customers, capacity, production or any other subject that could be considered to be commercially sensitive. Such discussions are illegal.

When planning to meet with competitors the meeting statement in Appendix 2 to this manual should be used in order to ensure that all parties understand the basic requirements. If a meeting with a competitor happens coincidentally (without prior arrangement and agenda e.g. MD’s meet on Charity Event, bump into each other at an industry invent or sales reps meet in a supermarket) the general rule stipulated above shall be followed – to have no conversations on commercially sensitive information.

2.1 BENCHMARKING
It is often perfectly legal to use benchmarking and other structured approaches in order to learn about the processes, ideas, practices or methods employed by other companies as long as it does not concern commercially sensitive information. Nevertheless, it is important to specify the legitimate purposes of benchmarking. For example, this can include improving performance, processes and quality, thereby enhancing efficiency, ultimately to the benefit of consumers.

If an exchange of information is taken further than necessary during benchmarking, by exchanging information on sales and prices for example, there is a high risk it is illegal. In certain limited circumstances competitors can benchmark costs. Always contact your local Legal or Group Legal prior to initiating any benchmarking or other similar exercises with a competitor.


2.2 JOINT PURCHASES/CONSORTIA BUYING
If we agree on joint purchasing with a competitor, we risk sharing commercially sensitive information with that competitor, which can be illegal. Care must always be taken that only the amount of information strictly needed to carry out the joint purchase is exchanged. Data should be aggregated and/or preferably be obsolete, i.e. at least one year old.

When entering into joint purchase agreements with competitors, consult local Legal/Group Legal.

While it is important to be aware of our own conduct, employees who are responsible for buying goods or services should also be aware of signs of anti-competitive behaviour by our suppliers. Evidence of such is e.g. identical or very similar price increases from suppliers of the same product within a short space of time. This may suggest the existence of a supplier cartel.

Joint purchasing can also be agreed between non-competitors such as agreements between Carlsberg and distributors or Carlsberg and another FMCG company which is not our direct competitor. Typically, if the joint purchasing power of the consortia/purchasing partners is not significant (the supplier can easily sell his product to other buyers in the market) such joint purchase is not illegal. If in doubt please reach out to your local Legal or Group Legal for further details on applicable interpretation for your market.

2.3 INFORMATION SHARING WITH JOINT VENTURES, JOINT VENTURE PARTNERS AND OTHER BUSINESS PARTNERS
Special care must be taken when sharing sensitive business information with our business partners whether they may be joint venture partners or other business partners such as distributors or licence partners and sometimes also with our joint ventures.

A joint venture partner or a licence partner does not belong to the corporate group of Carlsberg. The same can also apply to our joint ventures, which depending on the type of veto rights or level of shareholding might not be part of the corporate group. That means that when a joint venture is not part of the corporate group, the information that we share must be limited to what is strictly necessary for the partnership or the joint venture to function. Thus, we may have to consider establishing Chinese walls when cooperating with a business partner or a joint venture to ensure that only the information strictly necessary for the corporation or joint venture is shared. When setting up a joint venture or a partnership with a competitor always contact local Legal or Group Legal to ensure that we are only sharing strictly necessary information.

An example of licence agreements that requires special care is Carlsberg’s bottler arrangements in the Nordics with both The Coca-Cola Company and PepsiCo. Here special care is taken to not share any sensitive information - even within the group - to the detriment of competition and the license partners.

2.4  INFORMATION EXCHANGE IN CONNECTION WITH TRADE ASSOCIATIONS
Attending meetings in brewery or trade associations and network groups often means that we meet our competitors. Therefore special care needs to be taken in relation to being a member and to whom participates in such meetings and we need to ensure that we do not discuss anything which could be considered to be commercially sensitive information. Remember that also being quiet during such discussions is sufficient enough to be considered having been part of such illegal discussions. It is therefore crucial that we always follow the instructions on how to behave if competition rules have been compromised (see chapter HOW TO ACT IF COMPETITION LAW MAY HAVE BEEN COMPROMISED).

Be aware that if a trade association’s Articles of Association include illegal clauses such as loyalty between the members to conduct their business with respect for each other and refrain from competing for customers, the mere membership of such a trade association may be considered to be illegal.

AGREEMENTS WITH SUPPLIERS, DISTRIBUTORS AND CUSTOMERS
The vast majority of Carlsberg’s agreements are entered into with parties other than competitors, namely suppliers, distributors and customers. Typically, these agreements are unproblematic in relation to competition law, but special care has to be taken, if the agreement nonetheless restricts or may restrict competition – especially in markets where Carlsberg holds a strong market position (more than 30 percent).

These agreements are typically described and referred to in legal terms as vertical agreements because the parties to the agreement are active in different parts of the supply chain, such as manufacturing and retail. Below, a number of different types of vertical agreements are described.

Be aware that if Carlsberg holds a dominant position in a relevant market, stricter rules may apply than those set out below for vertical agreements, e.g. in relation to tying and bundling - see Chapter “ABUSE OF A DOMINANT POSITION”.

3.1 RESALE PRICE MAINTENANCE
Resale price maintenance is about setting or imposing resale prices that have the purpose or effect to maintain a minimum or fixed price for products sold. This is in most countries worldwide prohibited. For example, it is illegal resale price maintenance if Carlsberg and a distributor or if Carlsberg and a supermarket agree on the price at which the product will be resold.

However, it is not only a direct agreement on the resale price which is illegal, but also any other initiative that has the effect of a fixed or minimum resale price, such as setting a sales margin or a maximum discount. Resale price maintenance is prohibited in almost all markets that Carlsberg is active in.

Generally, we are allowed to recommend a resale price and to set a maximum price (see details below). However, it is important that we neither directly dictate a distributor’s or customer’s resale price nor do so indirectly by (for example) rewarding with a bonus for compliance with the recommended resale price. Neither is it allowed to use coercion such as threats, warnings or sanctions. Local Legal must therefore always be consulted if you consider to recommend a resale price or to implement a strategy concerning recommended resale price or if a customer or distributor asks for guidance on resale prices.

Another way of indirectly enforcing a retail price is by demanding that a product is sold at a price range comparable to that of another brand. A producer may e.g. require Carlsberg, when we distribute third party brands, to price their product within a premium segment – this is however illegal. Requiring a distributor or customer to price according to a certain segmentation, without setting a direct price amounts to the same as dictating a resale price in the eyes of authorities.

Accordingly, Carlsberg does not accept either being imposed to price within a certain segment, nor do we require our distributors and customers to price within a certain segment. However, we can of course recommend that our products are priced in accordance with a certain segment, e.g. we recommend that a Carlsberg is priced similar to a San Miguel.

When a product is sold to a distributor or customer, we cannot decide at which price the distributor or customer resells the product.
 
If a customer (e.g. a supermarket) asks Carlsberg to help impose a minimum price in relation to another customer of Carlsberg (e.g. another supermarket offering lower retail prices) it is important to remember that imposing such minimum prices (against the super market with the lower retail price) or facilitating price coordination between competing customers is illegal, and you should always refrain from taking any such actions.

However, Carlsberg can legally take a number of different initiatives that may help our customers, such as:

  • Carlsberg can recommend resale prices and fix a maximum resale price – a distributor may for example not sell at more than EUR 10 per unit. However, a maximum price must not be set so low as to operate as a minimum price, and you should always check with local Legal as some countries prohibit maximum prices.

Carlsberg can support marketing/sales promotions as long as the resale price is determined by the distributor/retailer.

3.2 CATEGORY MANAGEMENT
Category management are typically agreements between a supplier of goods and a distributor – typically a super market - regarding the supplier being entrusted with the marketing of a category of products. This sometimes also includes the products of competitors. These agreements can be considered both a supply agreement, and an agreement between competitors, as a super market can also produce their own products.

Category management is typically not considered an anti-competitive agreement, but it’s important to limit the actual work to what is necessary. Local Legal or Group Legal must always be consulted if we also intend to manage our competitors’ products.

If the distributor produces its own competing products, special caution must be taken not to enter into a cartel agreement. If for instance a super market has its own brand of beer we risk that our discussions on price and cost could be considered an illegal cartel agreement, even if the purpose of the discussions is to help the distributor increase its overall sales.


3.3 EXCLUSIVE DEALING ARRANGEMENTS
These are agreements to do business with only one supplier, distributor or customer. In general, these types of agreements are not considered anti-competitive, but if Carlsberg has a strong market position in a market special care must be taken. As a rule of thumb, exclusivity can be agreed without competitive risks if our market share and our business partners’ market shares are each below 30 percent of the relevant market. Local Legal or Group Legal shall always be contacted if it’s being considered to enter into an exclusivity agreement exceeding a period of 5 years.

In Europe, if our market share is above 30 percent we are not allowed to have exclusive agreements, including requirements for the customer to purchase 80 percent or more of a its entire need of the relevant category. Neither are we allowed to estimate the required purchase volume for a specific category so that it equals 80 percent or more of a customer’s entire need of said category. Local Legal and Group Legal must immediately be contacted if we believe that we have such purchase or volume requirements in our contracts.

Do note that a customer’s voluntary choice to buy solely from Carlsberg (without being bound by agreement to do so) is perfectly legal.
Carlsberg can recommend resale prices and fix a maximum resale price – a distributor may for example not sell at more than EUR 10 per unit. However, a maximum price must not be set so low as to operate as a minimum price, and you should always check with local Legal as some countries prohibit maximum prices.

Carlsberg can support marketing/sales promotions as long as the resale price is determined by the distributor/retailer.

Exclusivity agreements are normally not problematic if our market share and our business partner’s market share is each below 30 percent.


EXPORT BANS AND RESTICTIONS ON PARALLEL TRADE
In regards to the EU export bans and restrictions on parallel trade between countries in agreements with distributors/wholesalers are generally illegal, Outside the EU such bans and restrictions are typically legal. Even indirect import bans and parallel trade restrictions inside the EU are likely to be deemed anti-competitive. It is therefore prohibited to

  • Impose export bans within the EU
  • Hinder a distributor or a licensee from exporting outside the allocated territory upon unsolicited requests from a customer outside the territory (passive sales)

Nevertheless, under certain circumstances export bans and restrictions on parallel trade can be legal in the EU. If, for example, distributors are awarded designated territories, distributors may be prevented from actively approaching specific customers or customer groups outside their allocated territory (e.g. selling actively). Local Legal/Group Legal should be consulted regarding such specific situations.

HOW TO ACT IF COMPETITION LAW MAY HAVE BEEN COMPROMISED
Should you find yourself in a situation where competition law may be or may have been infringed, acting in a correct way is crucial in order to not implicate Carlsberg or yourself. If you participate in a meeting with competitors and the discussion concerns anti-competitive topics, commercially sensitive information or if you receive an e-mail from a competitor with content that is anti-competitive, you always need to actively distance yourself.

If the situation arises during a meeting with competitors, you need to immediately stop the discussion and make it clear that Carlsberg will not participate in such discussions and then leave the meeting. You need to ensure that your protest and departure is noted in the minutes of the meeting, and you also have to write your own minutes. You then need to immediately inform your local Legal or Group Legal.

If you receive an email with anti-competitive content you need to reply to the e-mail and clarify that such exchanges infringes competition law as well as Carlsberg’s Competition Compliance Policy and that you will disregard the content and delete the e-mail. Simply deleting the e-mail without actively distancing yourself from the content is not enough.

Always distance yourself from a meeting or from written exchanges if the competitor brings up or shares information which can infringe competition law.

In any situation where you suspect that competition law is or has been infringed you must immediately contact local Legal or Group Legal in order to mitigate any possible risk.

ABUSE OF A DOMINANT POSITION
At Carlsberg, we are good at doing business. In fact we are so good that we hold strong positions in many of the markets that we are active in. While it is good business for Carlsberg to have high market shares, we have to be aware that holding such high market shares means that we have a special responsibility when it comes to competition rules and as a consequence we are prohibited from certain ways of doing business, which competitors that have lower market shares can.

In order to determine if a company holds a dominant position, competition law focuses on geographic markets and product markets. In the beer industry, geographic markets are typically defined by national territories (e.g. France), while product markets are often divided into beer sold in on-trade and off-trade locations. Thus, a company might hold a dominant position in beer in the on-trade part of the market in France, but that does not mean that it necessarily holds a dominant position in the off-trade market.

In competition law, ‘dominant companies’ is typically used to describe companies holding, a market share of more than 40 percent of the relevant market.

It is not illegal to have a strong market position. On the contrary, holding a strong market position usually means that you are the most effective and best company within your line of business, but a company with a strong market position has to take special care not to abuse its market power.

It is important to note that being dominant in a market is not illegal, but the abuse of such a position through anti-competitive conduct is.

In the following section, a number of the most common types of abuse of a dominant position relevant for Carlsberg are listed. This is not an exhaustive list and the determination as to whether or not a particular conduct constitutes an abuse is often very complex. Local Legal or Group Legal should be consulted on initiatives in markets that could be relevant from an abuse of dominance perspective.

4.1 EXCLUSIVITY
Exclusive dealing arrangements, requiring a distributor or customer to purchase exclusively from a single supplier can be illegal, if the supplier thereby ties in a significant amount of the relevant market. In the EU this also includes requirements to purchase 80 percent or more of value or volume. If a company - which is dominant in the market of e.g. sale of beer to on-trade - enters into an agreement with a pub and requires the pub to purchase all of its beer exclusively, this may constitute an illegal exclusivity agreement. Local Legal or Group Legal shall be consulted prior to entering into such agreements.

However, it may be permissible to enter into exclusivity arrangements in certain situations such as in the event of sponsorship and venue sponsorship. Local Legal or Group Legal shall always be contacted prior to entering into such arrangements

Nevertheless, it is important to remember that in markets where a company does not hold a strong market position (typically below 30 percent), exclusivity may be perfectly legal and a smart business solution for both the company and its customers. Furthermore, if Carlsberg invests in a business partner (e.g. by providing trade loans or paying up front for the instalment of tabs and coolers) we may, following a thorough assessment, consider exclusivity for a specific period in order to recoup the investment.
4.2 REBATES AND DISCOUNTS
Loyalty rebates and target discounts, which can be a normal method by which a company seeks to attract customers, can have the same effects as exclusivity clauses. They may impede competition when offered by a dominant company.

Rebates and discounts applied by a company in a market where it has a dominant position should be the same for all (potential) customers, transparent and based on objective criteria. It is acceptable to offer a discount or rebate to a customer where the reduction is justifiable on the basis of genuine cost savings and efficiencies. Quantity rebates, which reflect cost savings in economies of scale, which are made available to all buyers and do not restrict the buyer’s choice of supplier, are permitted.

On the other hand, a dominant company may not grant fidelity (or loyalty) rebates or discounts that have the effect of tying that customer to the supplier. Such rebates are not based upon quantities, but on the percentage of its requirements purchased by the customer.

The following rebates and discounts are normally permissible:

  • Quantity rebates linked to the volume of purchases (and applicable to all purchases)
  • Rebates which are incremental and not retroactive rebates i.e., only paid for volumes above a threshold and not “rolled back” to cover all previous volumes
  • Discounts granted for prompt payment
  • Payments for services provided by a customer, such as participation in a special promotion or for providing shelfspace in a supermarket (provided that they are not actually payments for exclusivity)

Discounts relating to the achievement of economic efficiencies

There can be other grounds for granting rebates and discounts but such need to be approved by local Legal or Group Legal prior to being implemented.

4.3. TYING ARRANGEMENTS
Tying” means requiring a customer to buy an additional product as a condition for buying the primary product. As an example, it may amount to abuse if a dominant beer supplier requires that a customer have to buy a certain number of "low-selling" beer brands in order to be able to order the popular high selling brands which the supplier also offers. The effect is that the dominant beer supplier will leverage the sale of the desirable high selling product (the tying product) in order to force a less desirable product (the bound product) on the customer.

4.4 BUNDLED PRICING
Pricing two or more products together is generally considered okay and can even be advantageous to customers. However, there are certain circumstances when bundled pricing is unlawful. If, for instance, the bundled price is only available when the products are bought together and not separately and the bundled price is not a result of cost savings for Carlsberg (e.g. by delivering more products to the same customer), the pricing is likely to be a competition law breach.

For example, if a dominant company sells a premium beer and a non-premium beer together for 100, but the customer has to pay 75 and 55 for each product separately, that could be illegal if there are no objective reasons (e.g. economies of scale) to justify the lower bundled price.


4.5 PREDATORY PRICING
This type of abuse can happen when a dominant company deliberately lowers its prices in order to drive competitors out of the market. Predatory pricing is often characterised by the dominant company incurring a loss for the period, with the intent to drive a less substantial competitor out of the market. This occurs because the competitor does not have the financial resources to "ride out" the financial pressure created by the price reductions, but it is not a requirement that the competitors are actually driven out of the market.

When holding a dominant position, care should therefore be taken that prices are not set at a level below the average total cost. However, keep in mind that this does not prevent campaigns, which in general are perfectly legal.


4.6 DISCRIMINATION ON PRICES OR OTHER TRADING CONDITIONS
Discriminatory practices carried out by a dominant company can be illegal. This concept covers many different practices whose objectives and effects on competition significantly differ (examples of this are differences in discounts and rebates, selective price cuts, discriminatory input prices set by vertically-integrated companies, etc.). For instance charging significantly different prices to customers, unless the differences can be objectively justified, is illegal. It is justified to differentiate based on e.g. differences in tax, labour costs, exchange rates, transport costs or distance, or cost efficiencies resulting from bulk purchases/commitments.

If dominant in a market, then treat equal suppliers, distributors and customers equally.

Abusive discrimination can also arise if a dominant business charges different prices depending upon the nationality of the purchaser. The "discrimination" in this case would be based upon the grounds of "nationality".

However, it is of course perfectly legal if you charge one customer a different price based on that customer’s ability to negotiate a good deal.

4.7 REFUSAL TO SUPPLY
Normally, a business is entitled to decide upon its trading partners, and whether or not to supply goods or services to a particular customer. However, in many jurisdictions a dominant company is required to have some reasonable and fair commercial reason for cutting off, reducing supplies or threatening to do so to an existing customer. Objective justifications might include real concerns about the customer’s creditworthiness or a shortage of the relevant product.

4.8 MOST FAVOURED NATION CLAUSES (MFN) OR ENGLISH CLAUSES
MFN or English clauses means that a supplier agrees to always extend to its customers the most favourable price it offers other customers, or the other way around when a customer agrees to always pay its supplier the most favourable price it pays other suppliers.

In most cases MFN and English clauses are considered to be pro-competitive but they may raise concerns in certain circumstances. Such clauses are considered problematic when they are

i) jointly adopted amongst competitors,

ii) used in agreements covering a significant portion of the market, or

iii) negotiated into agreements by suppliers/sellers/buyers with high market shares.

The main concern is that MFN or English clauses might soften price competition between competitors, thereby having a similar effect to retail price maintenance clauses (see above), and/or acting as a barrier to entry into the market for new competitors.

If you are planning on inserting a MFN or English clause or if a supplier or a customer wants to include such a clause in an agreement contact local Legal or Group Legal for guidance.

CHECK LIST - WHEN ARE YOU REQUIRED TO CONTACT LOCAL LEGAL OR GROUP LEGAL?
In addition the reporting obligations listed in the Competition Compliance Policy, the following more specific situations, as set out in the above text, requires that you contact local Legal or Group Legal or self-assess if it is necessary.

WHEN INTERACTING WITH COMPETITORS

1. Any proposed agreement with a competitor must be presented to local Legal or Group Legal for review and approval before it is entered into.

2. Local Legal or Group Legal must be informed about other binding or non-binding documents such as a Letter of Intent, a memo or meeting minutes involving competitors.

3. Always contact your local Legal or Group Legal prior to initiating any benchmarking or other similar exercises with a competitor.

4. When entering into joint purchase agreements with competitors, consult local Legal or Group Legal.

5. Please note that also joint purchase agreements with non-competitors shall be checked with local Legal or Group Legal if the buying power of the consortia/purchasing partners is significantly (above 30 percent).

6. When setting up a joint venture or a partnership with a competitor always contact local Legal or Group Legal to ensure that we are only sharing strictly necessary information.

7. Local Legal or Group Legal must always be consulted if we also intend to manage our competitors’ products (category management).

8. Local Legal or Group Legal must immediately be informed of illegal discussions/agreements in trade associations or in other forums where competitors are present.

WHEN INTERACTING WITH SUPPLIERS, DISTRIBUTORS OR CUSTOMERS

1. Local Legal or Group Legal must always be consulted if you consider to recommend a resale price or to implement a strategy concerning recommended resale price or if a customer or distributor asks for guidance on resale prices.

2. Local Legal or Group Legal shall always be contacted prior to entering into exclusivity arrangements in markets where we have a market share above 30%.

3. Local Legal or Group Legal must always be contacted if it is being considered to enter into an exclusivity agreement exceeding a period of 5 years.

4. Only for EU countries: If we have a market share above 30 percent, local Legal or Group Legal must be consulted if you plan to introduce selective distribution or allocate a territory to a specific distributor.

5. Only for EU countries: If we have a market share above 30 percent, local Legal and Group Legal must immediately be contacted if you believe that we have purchase or volume requirements towards our customers which could equal 80 percent or more of value or volume in our contracts.


IF THERE IS A RISK THAT WE HAVE A DOMINANT POSITION

1. Local Legal or Group Legal should be consulted on market initiatives that could be relevant from an abuse of dominance perspective.

2. Contact local Legal if in doubt whether Carlsberg holds a dominant position in a given market.

3. Local Legal or Group Legal must be contacted prior to implementing a rebate or discount system if not granted on grounds specified in Section 4.2.

4. Local Legal or Group Legal shall always be contacted prior to entering into exclusivity arrangements.

5. Only for EU countries: Local Legal and Group Legal must immediately be contacted if you believe that we have purchase or volume requirements towards our customers which could equal 80 percent or more of value or volume in our contracts.

6. If you are planning on inserting a most favored nation or English clause or if a supplier or a customer wants to include such a clause in an agreement contact local Legal or Group Legal for guidance.

WHEN YOU PLAN ON COMMUNICATING EXTERNALLY

1. Contact local Legal or Group Legal before making announcements or communications on our pricing.

BEHAVIOURS
LANGUAGE, COMMUNICATION AND ANNOUCEMENTS

The language we use, both externally and internally (such as emails, memos, reports, minutes), will often determine if we get into trouble with competition law or not. Authorities interpret our language and behaviours in a very different way than you might expect. Language that you might consider pro-competitive may be interpreted anticompetitive by authorities.

It is therefore important that we always communicate, both in writing and verbally, in a competition compliant way. Moreover, when communicating you should assume that your words will become public or will be seen by a competition authority. You must therefore avoid language that could be understood as having the aim of harming consumers. Also, it is important to avoid exaggeration and speculation as such wording will often be taken for facts by authorities.

Language is not only important when communicating internally or with customers and suppliers. In recent years, competition authorities have taken particular interest in public announcements and communications, especially those regarding price increases.

RED FLAG: DOCUMENT CREATION

The following are only a few examples of terms and phrases which should be avoided in any communication, correspondence or agreement:

Dominant/dominate the market

  • A “right” or “fix” the margin
  • Fix prices/control prices
  • Control/stabilize the market
  • Prevent imports
  • Divide/partition the market
  • Reserve a market
  • Reasonable or reduced competition
  • Share the market/coordinate prices
  • Follow competitor prices
  • Drive out/eliminate from the market
  • Smash/crush the competition/remove/reduce competition
  • Boycott
  • Destroy this document/delete this e-mail after reading
  • “Our” market
  • “War”- terminology, e.g. fight, destroy, kill, enemy

While publicising our price lists can obviously help our customers to make a more informed choice and reduce their costs, we need to be careful that such publication or announcements cannot be considered to be price signalling.

The following guidelines can help to keep us on the right side of the law, but do contact local Legal or Group Legal before making announcements or communications on our pricing: 

  • Think twice before announcing a price increase in the media or talking about a price increase to journalists or at industry conferences or trade association – especially in markets where there are only a few large competitors. Never talk about pricing intentions, never provide more information than is necessary for the particular audience, and never mention specific competitors.
  • Only make an announcement if there is a legitimate underlying reason for doing so. For example, it should be justified by reference to a legitimate commercial need, e.g., to inform customers or investors. It needs to be tailored to that legitimate audience, e.g., aimed at reassuring investors about volatile markets.
  • The announcement should be made at an appropriate time, i.e., when the customers generally starts ordering, or when there are investor concerns or inquiries. Otherwise, an announcement could suggest an ulterior motive, such as signaling. The timing must not be or appear to be driven by how much time would be needed by competitors in order to align their prices.
  • Choose your words carefully. The announcement must be of Carlsberg’s own commercial position - not an industry one - and should avoid talking about future pricing intentions. There should be no appeal for collective action, industry discipline or “orderly pricing.” Mention of

MERGERS, ACQUISITIONS AND JOINT VENTURES
Carlsberg has grown substantially within the past two decades. A lot of this growth has happened via mergers, acquisitions and joint ventures. Competition laws worldwide regulate when companies are allowed to merge, acquire another company or form a joint venture, Carlsberg has had to seek prior approval from competition authorities in many of the markets it is active in today.

Obtaining approval is mandatory in many situations, takes time and requires a substantial amount of resources from Carlsberg and the companies involved. Such prior approval is almost always a condition for completion of a merger, acquisition or a joint venture which must be notified to competition authorities. Failing to apply for approval can result in large fines and disruption of the merger, acquisition or joint venture.

Authorities can prevent Carlsberg from merging, acquiring or forming a joint venture if they think that the transaction will restrict competition in the relevant market.

Competition authorities have the power to impose severe commitments from the participating companies. Authorities can demand that the merging parties sell off large parts of a contemplated business thereby rendering a transaction unfeasible, and authorities can even prevent a transaction from taking place if they conclude that it impedes competition. Therefore, it is paramount that Group Legal is contacted as early as possible in the acquisition process.

DAWN RAIDS
Competition authorities have the legal right to raid companies that they suspect of anti-competitive behaviour.

Besides Carlsberg’s one pager Dawn Raid Instruction for the reception and other key employees that need a brief overview at the time of a raid, Carlsberg has a more extensive dawn raid manual. (see separate manual) The more extensive manual is only relevant for the limited amount of people who will be directly involved in a dawn raid and can be obtained from local Legal or Group Legal. Both the one pager and the more extensive manual must be implemented where national competition authorities have the powers to conduct dawn raids.

The most important thing to remember, if we are raided by competition authorities, is to stay calm and to cooperate. Failure to cooperate may result in severe fine and complicate the investigation to the detriment of Carlsberg.

Authorities have the right to investigate any room, computer, smartphone and document of the company under investigation. In some countries, even key employees’ and directors’ private homes, cars and other personnel belongings may be subject to investigation.

Never obstruct an investigation by authorities or try to hide or destroy material. If raided by a competition authority, local Legal and Group Legal (Head of Competition Law) must always be contacted immediately.


COMPETITION COMPLIANCE CONTROL FRAMEWORK
In order to have a credible compliance program it is imperative to have controls in place. Such controls are processes designed to provide reasonable assurance for risk mitigation regarding the achievement of various objectives, including compliance with applicable competition laws. They involve ongoing tasks and activities (controls), implemented by Carlsberg at various levels and designed meaningfully to reduce the likelihood of problematic conduct.

More specifically, Group Legal has developed a control framework which stipulates a variety of controls to be carried out by either Group Legal and/or local Legal based on the risk picture of specific markets. The markets are divided into high, medium and low risk and have corresponding control activities allocated to them.

Group Legal will on an annual basis communicate to the various markets the risk allocation and corresponding controls to be performed. Further details on execution and reporting obligations to Group Legal will be communicated by the Head of Competition Law and in the Competition Compliance Control Framework Guidelines.

ROLES AND RESPONSIBILITIES



DEVIATIONS
All deviations needs to be approved by the manual owner. Such requests must be made in writing to the manual owner.
ASSOCIATED POLICIES AND MANUALS
Competition Compliance Policy  Legal & Intellectual Property Policy
CONTACT
For more information, please reach out to Head of Competition Law in Group Legal.

APPENDIX 1
COMPETITION LAW DOS AND DON’TS

Breaches of competition law creates risks both for Carlsberg as a company but also for its employees. The company could be fined up to 10% of its global turnover and you could risk fines or receiving a jail sentence, in addition to disciplinary proceedings by Carlsberg. You must therefore follow the below principles in your work. This is not an exhaustive list but it should enable you to recognize when you risk infringing the rules and when you need to contact your local legal or the Head of Competition law.
COMPETITION LAW DOS AND DON’TS



General principles

  • Do make business decisions independently of our competitors.
  • Don’t make agreements with competitors, formal or informal, on prices in the market (including any aspect of pricing), commercial terms or strategy, output levels or customer allocation.
  • Do take care with language in all communications (including emails and instant messaging apps) to avoid the risk of misinterpretation.
  • Don’t use language which might create unfounded suspicion of abuse of market power or predatory intention towards competitors. Don’t make internal notes that may imply illegal activity such as “burn after reading”, and don’t speculate on the legality of a particular conduct.
  • Don’t make any statements designed specifically to signal future pricing or other strategic intentions to competitors.
  • Don’t enter into joint selling/purchasing arrangements or other co-operation with a competitor without checking with Group Legal. 

 

 

When communicating with competitors, e.g. in trade associations and/or sharing information

  • Do prepare a meeting agenda (ask local legal or the Head of Competition law to review if you have any concerns), take minutes and archive them.
  • Do discuss industry-wide, non-sensitive matters such as health and safety standards, social aspects, co-operation on employee training or proposed changes
    to legislation affecting business, e.g. with a view to making industry submissions to the Government.
  • Don’t discuss or share commercially sensitive information about sales levels, prices, trading terms, discounts, costs, marketing plans and promotions towards specific customers, whether directly or indirectly (e.g. through a customer or supplier).
  • Don’t exchange price lists, cost overviews, future plans or other commercially sensitive information.
  • Don’t stay in meetings where commercially sensitive information is discussed and make sure that your departure is noted down.
  • Do submit aggregated and obsolete information for collection and distribution by a centrally controlled secretariat so that recipients of the information cannot decipher that Carlsberg supplied the information.
  • Do provide information for benchmark exercises if it has been approved by Group Legal
  • Do collect publicly available market data.

When dealing with customers or suppliers

  • Do consider whether exclusive customer arrangements are possible, especially if Carlsberg’s market share is below 30 percent.
  • Do recommend resale prices, but don’t hinder customers from setting their own resale prices.
  • Do set maximum resale prices if needed.
  • Don’t try to enforce recommended resale prices by incentives or other activities aimed at ensuring or pushing customers to abide.
  • Don’t encourage customers to actively and systematically collect information about competitors for you.
  • Don’t accept competitors price lists when offered to you.
  • Don’t persuade customers to inform you if lower prices have been quoted by other companies in order for Carlsberg to match them.
  • Don’t hinder EU distributors from exporting Carlsberg products to other EU countries. However, it is permissible to ban active sales outside a designated territory. 

When doing business in markets where Carlsberg is a clear market leader 

  • Do grant discounts that reflect actual cost savings for Carlsberg e.g. resulting from supplying a larger volume.
  • Don’t give retrospective rebates/discounts (i.e. rebates/discounts that apply to all of the customers purchases once it has reached a certain volume).
  • Do contact local legal if in doubt whether Carlsberg holds a dominant position in a given market.
  • Do be careful not to discriminate customers on terms that differ from the outcome of normal negotiations.
  • Don’t price products or give discounts for loyalty or exclusivity in order to persuade customers to purchase all their requirements from Carlsberg.
  • Don’t refuse to supply customers without a legitimate justification.
  • Don’t give customers discounts which are conditional upon buying all/large proportions of its needs from Carlsberg.

APPENDIX 2
PROTOCOL FOR MEETING ON ____ 201X

The participants in this meeting are committed to compliance with competition law. Carlsberg and X are/could be perceived as competitors in certain markets. Accordingly, the participants in this meeting will strictly follow the below/attached agenda. Any material deviations from the agenda, which are relevant from a competition law perspective, must be reviewed and approved in advance by legal counsel from both companies; otherwise, there will be no deviations. Under no circumstances shall the participants use the meeting to reach any understanding, expressed or implied, which restricts competition and/or exchange any commercially sensitive information unless strictly necessary and approved by legal teams. It is the duty of any person attending the meeting to stop any conversation or discussion related to restraint of trade, price fixing, marketing strategies or any other topics that involve competitively sensitive information or that could be considered anti-competitive. It is imperative that all meeting participants conduct themselves accordingly.

Absent approval from legal teams, the parties should not exchange competitively sensitive information. Where such information exchanges are approved by Legal, special precautions, including confidentiality agreements and/or clean team agreements, will be needed. Any discussions today regarding potential new relationships are hypothetical only and subject to further internal discussion by both parties.