19 June 2009
On June 4, 2009, the European Court of Justice (ECJ) rendered an important judgment on the permissibility of information exchanges between competitors.1 The ECJ concluded that a single meeting at which one company discloses a single piece of information capable of removing uncertainties in the market may be sufficient to establish an infringement under the Community competition laws.
Representatives of five operators offering mobile telecommunication services in the Netherlands held a meeting at which a participant noted that his company had initiated a reduction of standard dealer remunerations for postpaid subscriptions. The operators discussed this information and agreed that it was desirable to adjust the payments downward.
The Netherlands Competition Authority found that the five companies had concluded an agreement or had entered into a concerted practice. Subsequently, the authority imposed a fine totaling EUR 88 million after determining that the operators’ agreement violated a provision of the Dutch Cartel Act.2
The provision in the National Cartel Act is similar to Article 81 EC Treaty. Article 81(1) EC Treaty prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices that may affect trade between Member States and that have as their object or effect the prevention, restriction or distortion of competition within the common market.
The authority’s decision was appealed. The Dutch Appellate Court agreed that interpretative points on EU law arose and asked the ECJ to address the following issues:
- Clarification of the notion of “concerted practice”; in particular, the criteria that must be applied when analyzing whether a concerted practice has an anti-competitive object
- Clarification of the presumption of casual connection between concerted practice and market conduct
- Clarification of the extent of such presumption; in particular, whether the presumption applies if the concerted practice is based only on a single meeting between competitors
Concerted Practice and Object
The question of whether a concerted practice is anti-competitive must be analyzed in light of its objective and of the economic and legal context. While the intention itself is not an essential element, it can be taken into account. The ECJ judgment reiterates the position of law: it is not necessary to consider the actual effects of a concerted practice, where the objectives are apparently anti-competitive. The rationale behind this principle is that certain forms of collusion can be seen, by their very nature, as being injurious to the proper functioning of normal competition.
The ECJ judgment confirms the view that a concerted practice already pursues an anti-competitive object if it has the potential of having negative effect on competition; i.e., if it is capable of being anti-competitive. It is not necessary to prove an actual prevention, restriction or distortion of competition.
As far as information exchanges between competitors are concerned, the ECJ reiterated that each operator in the market must independently determine the policy that it adopts. The ECJ pointed out that while economic operators are expected to adapt themselves intelligently to their competitors’ existing or anticipated conduct. However, Article 81 EC Treaty strictly precludes any direct or indirect contact between competitors that might influence them or that might disclose their intentions or decisions about their own conduct on the market where the object or effect of such contact does not correspond to normal market conditions. The ECJ concluded that information exchanges between competitors infringe competition rules if, in the light of the market structure, they reduce or remove the degree of uncertainty relative to the operation of the market in question, , with the result that competition between undertakings is restricted.
The fact that the information exchanged did not concern end-consumer prices was found by the ECJ to be irrelevant. The court held that a concerted practice infringes competition rules by object when the exchanged information concerns competitively relevant parameters, even if there is no direct connection between the practice itself and consumer prices. The question of whether the information exchanged in the meeting would, by itself, remove the uncertainty in the market was left by the court to the determination of the appropriate national authority.
Concerted Practice and Market Conduct
According to the decisional practice of Community courts, there is a presumption of casual connection between a concerted practice and participating companies’ market conduct as long as those companies remain active on the market. This presumption is an integral part of the notion of concerted practice within the meaning of Article 81 (1) EC Treaty.
The ECJ has declared that because the interpretation of Community law by the Community courts is binding on all national courts, the courts are obliged to apply this presumption of casual connection in cases involving concerted practices. Companies taking part in a concerned practice are presumed to take account of the information exchanged with their competitors, unless they are able to prove the contrary with sufficient evidence.
Concerted Practice and Single Meeting
Some of the companies charged with infringement have argued that a casual connection can be presumed only if they have met regularly and with the knowledge that confidential information has been exchanged. It would be “irrational” to assume that a company would base its market conduct on information exchanged during the course of a single meeting, particularly when the meeting had an otherwise legitimate purpose.
The ECJ, however, did not agree with this contention, concluding instead that a single meeting may be sufficient for the participating companies to align their market conduct. According to the ECJ, what matters is not so much the number of meetings. Rather, the decisive issue is whether one or more meetings afford participants an opportunity to use exchanged information to determine their conduct on the market and knowingly substitute practical cooperation between them for the risks of competition.
The ECJ judgment sets a strict standard for information exchanges and clearly shows that such exchanges are capable of infringing Article 81 (1) EC Treaty. It also endorses enforcement activities of Member-State competition authorities when applying national provisions similar to Article 81 (1) EC Treaty. The judgment should remind companies to check and monitor their policies regarding contacts with competitors. Specifically, companies should be aware that:
- A concerted practice can infringe competition rules by object; i.e., it is not necessary to consider the actual effects of the practice.
- The intention of the company itself is not an essential element.
- A direct connection between a concerted practice and consumer prices is irrelevant to a determination of infringement.
- An infringement of the competition rules can occur if the subject of the information exchanged concerns competition-relevant parameters and removes or reduces uncertainties in the market.
- It is assumed that companies involved in a concerted practice take account of the information exchanged with their competitors unless they are able to prove the contrary with sufficient evidence.
- A single meeting may be sufficient to establish such presumption.
1. Judgment of the Court (Third Chamber) dated June 4, 2009, Case C 8/08. The judgment follows largely the opinion of Advocate General Kokott, delivered on February 19, 2009.
2. Decision of the Director-General of the Netherlands Competition Authority, as referred to in Section 62 (1) of the Competition Act of December 30, 2002, Case No. 2658-344.