A mere one-off exchange of information can be in breach of Article 81 of the EC Treaty
July 2009 – In June 2001, representatives of mobile telephone network operators (T‑Mobile, KPN, Orange and Vodafone) met in Holland to discuss a reduction of standard commission paid to dealers for postpaid subscriptions conceived to be implemented approximately in September 2001. The participants further exchanged certain confidential information of a commercial nature. The Dutch antimonopoly authority stated that the mobile telephone network operators entered into an anti-competition agreement or concerted their market conduct. Having found this agreement or conduct as a substantial restriction of competition and consequently as a prohibited practice, the antimonopoly authority imposed fines on the concerned undertakings.
The affected mobile telephone network operators appealed against the antimonopoly authority’s decision at a Dutch court as they believed that the national antimonopoly authority applied incorrectly the European competition law, in particular, by misconstruing the term „concerted practices“ with regard to the decision-making practice of the European Court of Justice (the “ECJ”). The operators argued that the concerted practice did not concern consumer prices/rates of the postpaid subscriptions for end users but only the commission paid to dealers. Furthermore, Vodafone stressed that a restriction of competition could not have been the objective of the meeting because the standard dealer commissions were to be reduced in any case.
In the proceedings concerning a preliminary question the Dutch court approached the ECJ with three principal questions which the ECJ answered in its ruling dated 4 June 2009 (C‑8/08, T-Mobile).
An anti-competition object is not limited to the determination of consumer end-prices
Are under Article 81 (1) of the ECC Treaty concerted practices which do not concern (i) consumer prices (ii) or rates of postpaid subscriptions to be invoiced to consumers but concern only commission for services provided to them by dealers, prohibited? The Dutch court emphasised that in its opinion the concerted practices had not as their object the determination of consumer prices of postpaid subscriptions. Is it possible to state that even such a conduct has an anti-competition object?
The ECJ stated that establishing concerted practices as having an anti-competition object cannot be conditional on a direct connection between the conduct and consumer prices. According to the EJC, Article 81 (1) of the ECC Treaty cannot be interpreted such that only those concerted practices are prohibited which affect directly the price paid by the end-consumer. This means that although the conduct of the mobile operators was to lead to the actual reduction of dealer commissions for postpaid subscriptions it could not have had a negative impact on end-users (e.g. by increase in price), it was a concerted practice having an anti-competition object pursuant to Article 81 (1) of the ECC Treaty.
In practice this means that concerted practices of competitors regarding distributors’ commission or profit margin, even if in good faith (e.g. reduction of the consumer price), involve a high degree of risk.
Casual connection between information exchange and market conduct
The second question concerned the presumed casual connection between the exchange of information and market conduct as reflected by the rulings of the ECJ. Under this presumption, in determining their market behaviour undertakings reflect the information they previously exchanged with their competitors. The exchange of information relieve undertakings of competitors’ unexpected reaction on their intended market behaviour (reduction of dealer commission in this particular case) which could occur without such information exchange. The ECJ stated that in a market as oligopolist as the concerned one the exchange of information may allow undertakings to find out about the market position and business strategies of their competitors and impact substantially the competition between economic entities.
In practice this presumption means that an antimonopoly office which intends to sanction the exchange of information between competitors does not have to prove that undertakings acted on the market on the basis of so acquired information. These undertakings would have to prove the opposite (i.e. that their market conduct was not and could not have been affected by the exchange of information) which, however, is very difficult in practice.
The Dutch court asked whether the legal presumption of casual connection between information exchange and market conduct forms part of the “substantive” European competition law which must be applied by a national antimonopoly authority and court or whether this presumption is subject to standard evidence under the rules of the national law as stated by some mobile telephone network operators.
The ECJ stated that the presumption of casual connection between information exchange and market conduct is implied by Article 81 (1) of the ECC Treaty as interpreted by the ECJ and consequently forms integral part of the applicable acquis communautaire. This means that a national court / antimonopoly authority is obliged to use the presumption of casual connection contained in the ECJ’s rulings. Therefore, in practise it will be presumed in all instances that competitors act on the basis of information they have exchanged because it is almost impossible to prove the opposite. As a consequence of that a mere exchange of information between competitors can constitute a breach of the competition law.
Even a one-off information exchange can be a problem
The Dutch court enquired at the ECJ whether the presumption of casual connection is applicable in all instances, i.e. even in the case of a one-off concerted conduct where an undertaking involved in such a conduct continues to carry on business on the market or only in instances where a concerted practice has been exercised on a regular basis and for a long period of time.
In its answer to this question the ESD stated that if an undertaking involved in information exchange remains active on the concerned market the presumption of casual connection shall be used even if the concerted practice is based only on a single meeting between the concerned businesses. A single meeting / information exchange between competitors thus may constitute a breach of the competition law.
By Jitka Logesová (Partner)
[1] The following shall be prohibited as incompatible with the common market: 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, and in particular those which:
- directly or indirectly fix purchase or selling prices or any other trading conditions;
- limit or control production, markets, technical development, or investment;
- share markets or sources of supply;
- apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
- make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.