Is a procurement collaboration legal?
The question comes up in almost every first meeting: can companies that compete with each other collaborate on purchasing? The competition rules do not prohibit procurement collaboration as such. Under the European Commission’s guidelines, which competition authorities in the EU and Norway take into account, joint purchasing is often pro-competitive. The line is drawn not at the collaboration itself, but at how it is structured and what it is used for.
What the rules say
Procurement collaboration is assessed under the same principles throughout the EU and the EEA. Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition, where they may affect trade between Member States. Article 53 of the EEA Agreement contains a corresponding prohibition for the EEA. The national competition acts of the Nordic countries contain parallel prohibitions, interpreted in the light of EU law: Chapter 2, Section 1 of the Swedish Competition Act, Section 6 of the Danish Competition Act, Section 5 of the Finnish Competition Act and Section 10 of the Norwegian Competition Act. These apply even where trade between states is not affected. An agreement that restricts competition may nevertheless be lawful if the conditions for exemption in Article 101(3) TFEU and the corresponding national provisions are met: the agreement must contribute to efficiency gains, consumers must receive a fair share of the resulting benefit, the restrictions must be indispensable, and competition must not be eliminated in respect of a substantial part of the products concerned. In competition law, “consumers” covers all customers further down the chain, including businesses — for a procurement collaboration, typically the members’ own customers.
Competition authorities in the EU and Norway take into account the European Commission’s Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (2023), which contain a dedicated chapter on purchasing agreements. The starting point in the guidelines is that joint purchasing is often pro-competitive: it can enable small and medium-sized buyers to achieve purchasing terms and efficiencies comparable to those of larger competitors, and lower purchasing costs can be passed on to customers further down the chain.
The guidelines also provide a safe harbour. Where the parties’ combined market share does not exceed 15% on either the relevant purchasing market or the relevant selling market, it is in most cases unlikely that the collaboration gives rise to market power. The safe harbour does not apply to collaboration that restricts competition by object, such as a buyer cartel. Market shares above 15% do not create a presumption that the collaboration is unlawful, but require a specific assessment of its effects.
In practice, the challenge in many categories is the opposite of buyer power: the supply side is more consolidated than the customer side. A procurement collaboration can then help to balance negotiating strength.
- •Joint tenders for goods and services the members buy
- •One organisation negotiating openly on behalf of the members
- •Shared supplier agreements with equal terms for all
- •Shared purchase-to-pay platform and supplier management
- •Members’ prices to their own customers
- •Customers, markets and market shares
- •Products, capacity and sales strategy
- •Access to each other’s transaction data
Where the line runs
Buyer cartel or procurement collaboration. A buyer cartel consists of buyers coordinating which prices or other terms they will accept, without any joint negotiation with suppliers on behalf of the participants. It is regarded as a restriction of competition by object and is prohibited. A procurement collaboration, by contrast, negotiates jointly and openly with suppliers on behalf of members that are bound by the negotiated agreements. The guidelines attach weight to suppliers being aware of this, and to the form and scope of the collaboration being agreed in writing.
Downstream in the value chain. A procurement collaboration concerns what the members buy, never what they sell. If the collaboration touches on the members’ prices to their own customers, customer allocation, markets or capacity, it is no longer a procurement collaboration and may constitute a cartel on the selling side. The risk the authorities look for is that coordination on the purchasing side spills over to the selling side.
Information exchange. A procurement collaboration needs information in order to negotiate. Exchange that is objectively necessary and proportionate for the joint negotiations is part of the collaboration. The line is drawn at information that is not necessary for the purchasing, and at anything concerning the members’ selling side. In practice, product data and prices come from the suppliers and are common to all members. Orders and invoices are the members’ own transaction data and belong to the individual member. The guidelines point to the importance of clear allocation of responsibilities and documented procedures for how such information is collected, stored and shared.
Buyer power. In 2013, the Norwegian Competition Authority (Konkurransetilsynet) issued an interim order to terminate the joint purchasing agreement between NorgesGruppen and ICA Norge (decision V2013-6). Among other things, the Authority emphasised that the largest player in the grocery market would gain greater negotiating power vis-à-vis suppliers, and that the collaboration could weaken competition between the chains. The case shows that the assessment depends on the parties’ market position: collaboration between the largest players in a concentrated market is assessed more strictly than collaboration that enables mid-sized buyers to negotiate on equal terms.
Purchasing obligations. That the members are bound by the negotiated agreements is part of what characterises a procurement collaboration. Obligations to purchase through the collaboration are not in themselves restrictive of competition. They are assessed according to whether they are objectively necessary and proportionate for the collaboration to function, and in the light of the parties’ market position.
How Aitenda is structured
Aitenda is structured within these boundaries. The collaboration concerns only what the members buy, never what they sell, and Aitenda has no role in the members’ sales. Aitenda negotiates openly on behalf of the members, and all members receive the same product prices and terms in the supplier agreements. The members’ transaction data belongs to the member and is not shared with other members. New members are admitted on objective criteria.
The result is a collaboration that strengthens competition in two directions: suppliers compete for real volume in open tenders, and members continue to compete in their own markets with lower purchasing costs — each on its own, as before.
The question to ask
Not “is procurement collaboration legal?”, but “is this collaboration limited to purchasing, does it negotiate jointly and openly on behalf of the members, does it keep the members’ transaction data separate, and are new members admitted on objective criteria?”.
This article is a general overview based on EU and EEA competition law and the Nordic competition acts, not legal advice. Market shares and specific contractual terms must be assessed for each collaboration and each category.