Nexperia-crisis breeds creativity

The recent “Nexperia crisis” sparked an initiative by the German Automotive Industry Association (VDA) which created a platform enabling carmakers and suppliers to offer and request leftover semiconductor stock. The platform is supposed to mitigate acute chip shortages (notably involving components from Nexperia), which threatens vehicle production in Germany, by effectively connecting players across the industry and efficiently matching supply and demand. The Federal Cartel Office (FCO) gave his blessing with President Andreas Mundt stating that the information exchange implied could improve the allocation of scarce chips and help delay production cuts, ultimately benefiting both the industry and consumers. The VDA semiconductor platform follows a pattern of industry-led digital trading platforms that have sought and received antitrust approval in Germany. This case is interesting as the FCO continues to show its openness for innovative platforms that improve market efficiency, provided certain reliable safeguards are built-in to prevent anti-competitive information exchanges.

The VDA platform

The VDA platform was conceived against the backdrop of a looming semiconductor scarcity that jeopardizes automotive supply chains and raises the risk of stalling assembly lines. The platform is aimed at improving transparency and accessibility to crucial supplies in this emergency: companies with excess semiconductor inventory can anonymously list unneeded resources, and those in need can secure critical components that would otherwise sit unused. This collaborative approach reflects lessons from recent crises (e.g. pandemic-related disruptions), where competitor coordination – within legal boundaries – helped overcome supply shortages. Collaboration among competitors inevitably raises a tension between competition law and the need to find industry-wide solutions to overcome shortages of critical supplies. On the one hand, antitrust law strictly prohibits agreements or coordinated practices between companies that restrict competition – which could include competitors sharing stock levels or coordinating supply via a joint platform. On the other hand, the need to overcome supply chain shortages and increase market efficiency calls for efficient cross-company, data-driven solutions as exemplified by the VDA platform.

Finding the balance between these objectives is challenging. A poorly designed exchange platform might inadvertently function as a hub for collusion, for example by increasing market transparency to a degree that competitors can monitor and align each other’s behaviour (a risk flagged in previous cases like ECEMENT – more on this below). In principle, if the VDA’s semiconductor cooperation led to agreements to fix prices or allocate supplies, it would run afoul of Section 1 ARC / Article 101(1) TFEU and could incur severe penalties.

Antitrust by design: the VDA platform’s safeguards

The FCO’s comfort with the platform rests on several key safeguards designed to prevent any anti-competitive effects – largely in line with what has become the FCO’s framework for assessing similar industry-wide platforms over recent years:

• Anonymous, price-free listings: Participating companies will post offers of surplus chips anonymously, with no prices disclosed on the platform. Any pricing and terms are then negotiated bilaterally outside the platform, rather than via a public bidding process which would reveal competitively sensitive information.

• Neutral platform operator: While the users of the platform are inter alia direct competitors in procuring semiconductors, heightening antitrust risks, the exchange will be run by an independent, neutral entity rather than by an industry player. By outsourcing operations to a third party, the VDA platform removes direct contact between rival companies and builds in an extra layer of insulation between competitors.

• Temporary six-month pilot: The semiconductor exchange is explicitly a short-term measure – its operation is capped at six months. This time limitation confines the platform’s role to addressing the immediate shortage crisis, rather than becoming a permanent marketplace. A transient platform is less likely to evolve into a standing market information system, and it limits the window during which any unforeseen competitive issues could arise.

A continued series of similar FCO approvals

The VDA semiconductor platform follows a growing pattern of industry-led digital trading platforms that have received green-light from the FCO. In recent years, the FCO has evaluated several similar B2B platforms in different sectors and developed a consistent set of criteria to ensure effective competition is preserved:

• ECEMENT (cement trading platform, 2017): ECEMENT is a neutral marketplace for cement suppliers and customers, which the FCO “cleared” in 2017. The FCO found the concept unproblematic under competition law, and, in fact, expected (pro)competitive impulses from it for the cement market. A key condition, however, was that the platform would drop its proposal to publish price indices/benchmarks based on transaction data before implementation. The authority warned that such indices could act as a market information system revealing competitor pricing and facilitate tacit collusion in an already transparent industry. Elements crucial for the FCO’s green light were that (1) transactions on ECEMENT are conducted via anonymized auctions, with identities disclosed only after a deal is struck, and that (2) the platform is open to all cement producers and buyers on non-discriminatory terms (i.e. not only a certain portion of the industry).

• XOM Metals (steel trading platform, 2018): In 2018, the FCO assessed a joint B2B sales platform launched by steel distributor Klöckner & Co, intended to connect steel producers, traders, and customers online. While the FCO was concerned, at first, with the issue of increased transparency and the likelihood of the platform enabling competitors to monitor each other’s prices and/or customers, these concerns were addressed by several robust controls to the satisfaction of the FCO: The platform introduced a technically secure, isolated vendor area where each supplier can only see its own transactions and clients, preventing any view into rivals’ pricing or customer data. The identity of trading partners remains confidential until a deal is concluded. Furthermore, XOM Metals was set up as a separate subsidiary, with organizational and personnel independence from Klöckner’s core business, while Klöckner agreed to firewalls limiting its access to platform data via corporate governance channels.

• Unamera (agricultural commodities platform, 2020) & OLF (mineral oil trading platform, 2020): In 2020, the FCO took a similar approach vis-à-vis two joint B2B trading ventures in completely different sectors: grain trading (Unamera) and fuel products (OLF, a joint venture of Shell and an online fuels startup). The authority signalled green light for both platforms after ensuring they were structured in line with the XOM-Metals criteria to prevent collusion: The platforms had to make sure that users (competitors) cannot see detailed data revealing or allowing conclusions with respect to rivals’ market behaviour. For example, supply data (prices, quantities, locations) must be displayed anonymously, and the identity of counterparties can only be revealed at the final stage of a deal. This criterion is mirrored by the anonymity principle of the recent VDA semiconductor platform. In addition, strict Chinese walls had to be implemented by the platform’s owners/shareholders to shield competitively sensitive information from any investor company active in the same market.

• ReWaste24 (waste management platform, 2023): In 2023, the FCO dealt with an online exchange for waste disposal services, involving several competitors in the waste industry. Initially, the FCO raised competition concerns because the platform operator (a major waste company) could access sensitive data, and the FCO saw the risk that the system could function as a price-monitoring tool for competitors. The project was approved only after ReWaste24 was restructured with strict safeguards making sure that (1) user undergo verification and cannot simultaneously be suppliers and buyers; (2) each disposal request is tied to a real waste transaction (with documentation/photos) to prevent dummy inquiries aimed at gleaning price levels; (3) the platform is operationally separate from its parent company (separate staff, IT, and management) and the parent’s information rights are curtailed.

Outlook

Summing up, the FCO’s decisional practise – from cement and steel to waste and now semiconductors – offers some helpful guiding principles which companies should keep in mind when considering collaboration through B2B platforms to help strike the balance between unlawful industry collaboration and pro-competitive initiatives to mitigate supply shortages:

1. Limit transparency

2. Organizational and personal separation

3. Manage the flow of competitively sensitive information

4. Limited scope and duration (“Necessity principle”).

It is important to note that all the FCO decisions described are the result of informal consultations and have no binding effect for the European Commission or courts. However, when considering the sequence of cases outlined above, the FCO’s consistent approach provides a blueprint for companies seeking to collaborate via B2B trading platforms in Germany – and even in other countries, where national competition authorities may use these cases as guidance. We can expect more industries to explore similar exchange platforms – whether to share critical components, jointly stockpile essentials, or balance supply and demand in real-time. Going forward, any such initiative should be designed with compliance in mind from the outset as businesses must anticipate scrutiny from the competition authorities on a case-by-case basis.

BLOMSTEIN will closely monitor further developments and keep you informed. If you have any questions on the creation of a competition law compliant B2B platform, Anna Huttenlauch, Celia Diederichs and the entire team is ready to assist you.