1. Introduction

   These guidelines consider the competition law implications of the activities of the Inter-Alpha Group (the “Group”) and provide practical guidance for its members to follow in order to ensure they comply with the competition rules at all times. They underpin the commitment to competition law compliance which is recorded in the current Membership Agreement for the Group.

   The guidelines are not intended to detract from the objectives of the Group, which are set out in the Membership Agreement and reflect the purpose for which the Group was established in the early 1970s. These objectives include, for example, the provision of a platform for the exchange of views and effective co-operation on non-competitive issues. We understand, in this context, that the meetings of the Group and sub-committees do not constitute a forum for the disclosure of competitively sensitive information between member banks.

   Although these guidelines focus on the position under EU competition law, national competition laws within the EU-27 are equally relevant to the Group’s activities. These provisions are very similar to (and are often modelled upon) Article 81 of the EC Treaty.
   

2. Overview of competition rules

   2.1 Article 81 of the EC Treaty

   The activities of trade associations and agreements entered into by trade associations potentially fall within the scope of Article 81 of the EC Treaty. Article 81(1) prohibits:

   “all agreements between undertakings, decisions by associations of undertakings and concerted practices, which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market.”

    The activities of the Group will therefore fall within the scope of Article 81(1) if the activity in question: (i) has an appreciable effect on competition in the relevant market; and (ii) may affect trade between Member States. Any activity which falls within the scope of Article 81(1) may, however, still be valid and enforceable if it satisfies the conditions for an exemption under Article 81(3) – e.g. if the benefits to consumers outweigh the costs. It is necessary to distinguish in this context between:

   • hard core infringements, such as price fixing and market sharing (which can never be exempted); and
   • other infringements, such as information sharing (which may not be appreciable, or where we need to weigh up pros and cons).

   National competition laws can be expected to prohibit anti-competitive agreements within individual countries, i.e. where they will not affect trade between Member States.

   2.2 Sanctions

   The sanctions for breach of the Article 81 prohibition are severe. In particular:
   (i) substantial fines can be applied to member banks (up to 10 per cent of the sum of the worldwide turnover of each member active on the market affected by the infringement);
   (ii) there is a risk of follow-on actions for damages by third parties who have suffered loss as a result of the breach;
   (iii) any agreement which infringes the Article 81 prohibition is void;
   (iv) there is a risk of significant reputational damage, particularly for “hard core” infringements of the competition rules; and
   (v) in some countries including the UK and Ireland, it is a criminal offence for individuals to engage in cartel activity, and extradition may apply.
    

3. Increased competition law risk

   3.1 Increased scrutiny of the financial services sector

   The European Commission and national competition authorities have increased their scrutiny of the financial services sector over the last few years, including through formal inquiries and unannounced “dawn raids”. For example:

   3.1.1 European Commission inquiry into financial services sector The Commission’s financial services sector inquiry has increased this focus. The Commission’s report on the retail banking sector, which was published in January 2007, concluded that whilst certain types of co-operation (e.g. creating and operating common standards or platforms) may be pro-competitive, co-operation extending to banks’ strategies, pricing or selling policies (particularly amongst savings and/or cooperative banks) creates a risk of collusion. In its report, the Commission has identified a number of areas for potential competition law enforcement activity, in cooperation with national competition authorities.

   3.1.2 Increased enforcement action by national competition authorities National competition authorities within the EU-27 have also shown that they are increasingly interested in the financial services sector. For example to take a snapshot of 2006 / 7:

   • In Denmark, the Danish competition authority has recently found evidence of hard-core cartel activity between seven banks involving market sharing and price co-ordination;
   • In the Czech Republic, six building societies were fined €1.8 million in December 2006 for entering into an illegal information exchange agreement;
   • In the Netherlands, three banks were dawn raided in mid-April 2007 on suspicion of price-fixing in the corporate credit market.

   3.2 Significant changes to the nature of the Group

   The competition law risks associated with Inter-Alpha have increased as the financial services sector has opened up and the Group’s members have grown. There is now significant scope for competition between Inter-Alpha members both at the EU level and the national level (e.g. in the UK following the takeover of Abbey by Santander). The scope for competition between members across borders is likely to increase as new initiatives (such as SEPA, for example) increase the scope for the supply of pan-European financial services.
    

4. Application of the competition law rules to the Group
   
   4.1 General principles
   • As a trade association, Inter-Alpha provides a forum for the exchange of information between its members. Hence, Article 81 and national competition laws are capable of applying to the activities of the Group.
   • Competition authorities recognise that trade associations may exchange information on a variety of matters legitimately and with no risk to the competitive process. Indeed, the sharing of such information may be pro-competitive. For example, discussing regulatory developments (e.g. Basel II, SEPA, Credit Risk Modelling etc) or other developments of general importance to the banking industry is clearly permissible (and consistent with the objectives of the Group).
   • The exchange of information may, however, have an adverse effect on competition where it serves to reduce or remove uncertainties inherent in the process of competition or otherwise facilitates coordinated behaviour. Discussions of industry trends or developments, for example, must not “spill over” into exchanging potentially sensitive information or adopting a common position that would raise competitive concerns.
   • Whether information is commercially sensitive will depend on the circumstances of each individual case: the market characteristics, the type of information and the way in which it is exchanged. In practical terms, any information that satisfies all three of the following conditions is likely to be commercially sensitive and should not be disclosed:
   (i) a company would not have this information about its competitors during the normal course of business; and (ii) the information is not publicly available (or easily accessible from a non-confidential sources); and (iii) knowledge of the information in question could give other members a competitive advantage.
   •  The exchange of price information (e.g. banking fees and charges, interchange fees, pricing policies, current/future profit margins or profitability targets, terms and conditions, cost information etc.) is particularly sensitive. The same is true for other commercially sensitive matters, such as individual banks’ current or future strategies, expansion plans, customer information, new product plans, sales/ promotional plans, plans to bid for specific contracts or tenders, confidential proprietary technologies or marketing plans etc. As a general principle, the more recent or current the information exchanged, the more likely it is that the exchange will have an appreciable adverse effect on competition.
   • Whilst the compilation of historical or aggregated data may not have an appreciable effect on competition, it must not cover (or enable members to work out) confidential information relating to individual members.
      
   4.2 Practical guidance for Inter-Alpha

   We are aware that the meetings and sub-committees of the Group do not include discussions of competitive market issues on a national or international basis such as banking terms or fees, interchange fees, customer information (general or specific). The Membership Agreement for the Group makes it clear that meetings do not provide a forum for the disclosure of competitively sensitive information between member banks.

   In order to ensure that discussions at meetings of the Steering Group or sub-groups do not inadvertently “spill over” into more sensitive issues, we have included a series of “do’s” and “don’ts” for members. These are set out below.

Competition Compliance Guidelines: Do’s and Don’ts
 

DON’T

1. Discuss price or sales related information with other members such as:
   - individual prices, price changes, pricing methods, etc;
   - customer terms and conditions;
   - sales or market share data that are not available in the public domain.
2. Discuss information relating to current or future strategies with other members such as:
   - proposed marketing strategies;
   - proposed capital investment or acquisitions;
   - proposed products or entry into a new market;
   - proposed responses to regulatory / legislative changes.
3. Agree on a common behaviour and particularly so where that would have the effect of excluding other competitors (i.e. non-members)
4. Draft documents (such as presentations and minutes, and even emails and draft documents) which are unclear or ambiguous. Remember that what you draft today could be considered in a different context tomorrow by a regulator.

DO

1. Keep competition rules in mind at all times, particularly when drafting documents.
2. Ensure that discussions on regulatory and other industry developments do not spill over into potentially sensitive matters.
3. Bear in mind that, the more sensitive the information is, the more important it is to follow the advice set out in the Guidelines.
4. Avoid recommendations and suggestions of future conduct.
5. Prepare and circulate agendas for meetings in advance and ensure that full minutes of any working group or Steering Committee meetings are taken. Avoid general or ambiguous statements in the minutes – e.g. “Members had a general discussion”.
6. Seek advice if you have any doubts about the compatibility of items with competition law.
7. Consider having a legal adviser present (or conduct a prior review) if you do have any specific concerns, to ensure compliance with competition law rules and, if needed, provide guidance on specific aspects of competition law.