Originally published June 10, 2009
Keywords: European Court of Justice, ECJ, Antitrust standard, information exchanges, competitors, infringement, Community Competition Laws
On June 4, 2009, the European Court of Justice ("ECJ") rendered an important judgment1 on the permissibility of information exchanges between competitors. The ECJ has 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 one of the representatives communicated the reduction of standard dealer remunerations for postpaid subscriptions by his company. The operators discussed this and agreed that it was desirable for the payments to be adjusted downwards. The Netherlands Competition Authority found that the five companies had concluded an agreement or had entered into a concerted practice. The Dutch authority imposed a fine totalling EUR 88 million after finding a violation of 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, 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 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 as 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 whether a "concerted practice" is anticompetitive has to be analyzed in the light of its objective and 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 effects on competition, or, in other words 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 which it adopts. The ECJ points out that 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, which might influence them or might disclose their intentions or decisions about their own conduct on the market where the object or effect of such contacts do not correspond to normal market conditions. The ECJ concludes that the exchange of information between competitors would infringe competition rules if, in the light of the market structure, it reduces or removes the degree of uncertainty as 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 regard end consumer prices was found to be irrelevant. The ECJ held that a concerted practice can infringe competition rules by object, if the subject-matter of the information exchanged concerned competitively relevant parameters, even if there is no direct connection between that practice and consumer prices. The question as to whether the information exchanged in the meeting would by itself remove the uncertainty in the market was left to be decided by the 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 market conduct of the participating companies, where the 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 since the interpretation of Community Law by the Community Courts is binding on all National Courts, they are obliged to apply this presumption of a 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 argued that a casual connection can only be presumed where they have met regularly 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 just one meeting, in particular, where the meeting otherwise had a legitimate purpose.
The ECJ, however, did not agree with this contention and concludes 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 but whether the meeting(s) afford the oppurtunity to take account of the information exchanged with their competitors in order 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. It clearly shows that information exchanges as such are capable of infringing Article 81 (1) EC Treaty. It also endorses enforcement activities of national competition authorities when applying national provisions similar to Article 81 (1) EC Treaty. The judgment should remind companies to check and monitor their policy in relation to contacts with competitors:
- 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 companies itself is not an essential element;
- it is irrelevant whether or not there is a direct connection between the concerted practice and consumer prices;
- an infringement of the competition rules can occur if the subject-matter of the information exchanged concerns competition relevant parameters and removes uncertainties in the market;
- it will be assumed that companies taking part in a concerned 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.
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