REACH for your legal advisor
1 Aug 2008
The EU chemicals safety regulations REACH will leave companies "between a rock and a hard place, and they will need help to navigate these treacherous waters." This is the opinion of Michael Grenfell, a partner at legal firm Norton Rose, specialising in competition, regulatory and EU law, noting how the regulations will require companies to enter consortia in order to streamline and share the costs and testing burden involved in REACH.
Any co-operation creates grounds for suspicion under EU competition law, which discourages any collaboration pressure on them to reduce prices in the market, Grenfell pointed out at the Living with REACH seminar at Norton Rose's London offices. Such activity, he said, risks infringing Article 81 of EU competition law, which prohibits agreements by business associations that restrict competition.
The particular concern, said Grenfell, is that requirements to participate in Substance Information Exchange Forums (SIEFs) and joint registration consortia under REACH might lead competitors into agreeing to anti-competitive practices. These forums could potentially also be used to agree to fix prices, limit production or exchange competitively sensitive information.
Consortia members must carefully restrict their activities to sharing technical data. Use of aggregate information on output and sales, however, is permitted, as long as it does not include price information or identify any individual company, said Grenfell. They can, he added, also decide who may or may not join a consortium, but only if they provide "clear, objective criteria" to show they are not trying to disadvantage other players in the market.
To avoid the many legal pitfalls, Grenfell recommended the use of confidentiality agreements among the individuals involved in the consortia to ring-fence information being exchanged. Meanwhile, he said, participants should also consider appointing a third-party to facilitate the information handling procedures and avoid unlawful exchanges within the SIEF or consortia.
Grenfell went on to caution that under Competition Law the term 'agreement' not only covers contracts but also communications such as emails and even informal discussions at a coffee break. The authorities, he pointed out, have "amazingly strong investigative powers, for example to seize emails and diaries. They also offer incentives for whistleblowers, so nobody can ever be sure that the informal chat does not get to the competition authorities."
So at a SIEF meeting if someone starts sharing illegal information regarding pricing, for example, Grenfell's advice is that, "you take clear steps to distance yourself publicly from the discussion or inform the competition authority both verbally and in writing - perhaps via the facilitator to protect yourself in the event of something leaking out."
The EU and national governments can impose very substantial fines for anti-competitive activities, said Grenfell, citing how Microsoft had recently been fined Euro500 million. More worryingly, he said, the victims of anti-trust activities can, and do, sue in the national courts, while guilty companies also face the threat of criminal penalties, disqualification of directors and massive damage to reputation.
Grenfell's views were echoed by Tim Jessel, commercial director of REACHReady, which was set up by the Chemical Industries Association to help companies deal with REACH regulation. "Pre-registration might be relatively straightforward, what comes afterwards is not," he told delegates at the Norton Rose conference.
SIEF data-sharing activities, said Jessel, will include agreeing what data is needed, whose existing data can be used and what new data must be obtained. Participants will also have to decide how much money should be paid and how to apportion these costs.
"Some information will always be separate … while other information will be joint, with opt-outs, for example, in cases of disproportionate costs, commercial secrets and disagreements over selecting data," he stated.
Overall, concluded Jessel, SIEFs and joint registration will require new skill sets, new roles and responsibilities and other new demands on companies' resources. Companies, he warned, could find themselves entering "difficult relationships with potential for conflict. It would be wiser to build upon existing groups, such as trade associations, than to start from scratch, and to appoint an independent trustee or facilitator for the process."
Any co-operation creates grounds for suspicion under EU competition law, which discourages any collaboration pressure on them to reduce prices in the market, Grenfell pointed out at the Living with REACH seminar at Norton Rose's London offices. Such activity, he said, risks infringing Article 81 of EU competition law, which prohibits agreements by business associations that restrict competition.
The particular concern, said Grenfell, is that requirements to participate in Substance Information Exchange Forums (SIEFs) and joint registration consortia under REACH might lead competitors into agreeing to anti-competitive practices. These forums could potentially also be used to agree to fix prices, limit production or exchange competitively sensitive information.
Consortia members must carefully restrict their activities to sharing technical data. Use of aggregate information on output and sales, however, is permitted, as long as it does not include price information or identify any individual company, said Grenfell. They can, he added, also decide who may or may not join a consortium, but only if they provide "clear, objective criteria" to show they are not trying to disadvantage other players in the market.
To avoid the many legal pitfalls, Grenfell recommended the use of confidentiality agreements among the individuals involved in the consortia to ring-fence information being exchanged. Meanwhile, he said, participants should also consider appointing a third-party to facilitate the information handling procedures and avoid unlawful exchanges within the SIEF or consortia.
Grenfell went on to caution that under Competition Law the term 'agreement' not only covers contracts but also communications such as emails and even informal discussions at a coffee break. The authorities, he pointed out, have "amazingly strong investigative powers, for example to seize emails and diaries. They also offer incentives for whistleblowers, so nobody can ever be sure that the informal chat does not get to the competition authorities."
So at a SIEF meeting if someone starts sharing illegal information regarding pricing, for example, Grenfell's advice is that, "you take clear steps to distance yourself publicly from the discussion or inform the competition authority both verbally and in writing - perhaps via the facilitator to protect yourself in the event of something leaking out."
The EU and national governments can impose very substantial fines for anti-competitive activities, said Grenfell, citing how Microsoft had recently been fined Euro500 million. More worryingly, he said, the victims of anti-trust activities can, and do, sue in the national courts, while guilty companies also face the threat of criminal penalties, disqualification of directors and massive damage to reputation.
Grenfell's views were echoed by Tim Jessel, commercial director of REACHReady, which was set up by the Chemical Industries Association to help companies deal with REACH regulation. "Pre-registration might be relatively straightforward, what comes afterwards is not," he told delegates at the Norton Rose conference.
SIEF data-sharing activities, said Jessel, will include agreeing what data is needed, whose existing data can be used and what new data must be obtained. Participants will also have to decide how much money should be paid and how to apportion these costs.
"Some information will always be separate … while other information will be joint, with opt-outs, for example, in cases of disproportionate costs, commercial secrets and disagreements over selecting data," he stated.
Overall, concluded Jessel, SIEFs and joint registration will require new skill sets, new roles and responsibilities and other new demands on companies' resources. Companies, he warned, could find themselves entering "difficult relationships with potential for conflict. It would be wiser to build upon existing groups, such as trade associations, than to start from scratch, and to appoint an independent trustee or facilitator for the process."
