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By | OUT-LAW.COM 5th June 2009 09:18

ECJ: One meeting can count as market-rigging

Data recipients advised to cover eyes, ears and go 'la-la-la'

A group of companies can be guilty of breaking competition law even if they only meet once and the action taken does not result in higher prices for consumers, the European Court of Justice (ECJ) has ruled.

A competition law expert said that employees who find themselves given sensitive information by competitors must make an "active attempt" to distance themselves from it.

The Court ruled on a single meeting of Holland's five mobile phone networks in 2001 at which the companies discussed cutting the fees paid to phone dealers. It said that despite the fact that there was only one meeting, there should be a presumption that the meeting was connected to the companies' subsequent behaviour.

The five companies are accused of deciding to reduce payments to mobile phone dealers in a way that breaches European Union competition law. The ECJ, the EU's highest court, was asked how the Dutch court hearing the case should interpret EU law.

It asked whether or not a single meeting could ever count as 'concerted practice', one of the types of collusion banned by EU competition law. It also asked whether or not it should presume a connection between the meeting and the companies' subsequent behaviour.

The Court said that 'concerted practice' was the weakest of three kinds of agreed action that EU law bans. The three kinds of action are distinguishable by their intensity, the ruling said, but sanctions for anti-competitive behaviour must apply regardless of which category companies' behaviour falls into.

"The criteria laid down in the Court’s case law for the purpose of determining whether conduct has as its object or effect the prevention, restriction or distortion of competition are applicable irrespective of whether the case entails an agreement, a decision or a concerted practice," said the Court's ruling.

In assessing whether the meeting could be considered illegal 'concerted practice', the Court said that previous rulings had spelled out what characterises such behaviour.

"The Court has held that such a practice is a form of coordination between undertakings by which, without it having been taken to the stage where an agreement properly so-called has been concluded, practical cooperation between them is knowingly substituted for the risks of competition," it said.

The Court also said that some behaviour is inherently anti-competitive, even if it cannot be shown to have damaged competition.

"In deciding whether a concerted practice is prohibited by [EU law], there is no need to take account of its actual effects once it is apparent that its object is to prevent, restrict or distort competition within the common market," said the ruling. "The distinction between ‘infringements by object’ and ‘infringements by effect’ arises from the fact that certain forms of collusion between undertakings can be regarded, by their very nature, as being injurious to the proper functioning of normal competition … there is no need to consider the effects of a concerted practice where its anti competitive object is established."

The Court said that for the companies' behaviour to count as having an anti-competitive 'object' it only has to have "the potential to have a negative impact on competition … whether and to what extent, in fact, such anti-competitive effects result can only be of relevance for determining the amount of any fine and assessing any claim for damages," it said.

The Court also said that the behaviour could have an anti-competitive intent, even if consumers paid no more for mobile phone services and the only effect was on phone dealers. "It is not possible on the basis of the wording of Article 81(1) [of the European Convention]to conclude that only concerted practices which have a direct effect on the prices paid by end users are prohibited," it said.

"[The law] is designed to protect not only the immediate interests of individual competitors or consumers but also to protect the structure of the market and thus competition as such. Therefore, contrary to what the referring court would appear to believe, in order to find that a concerted practice has an anti competitive object, there does not need to be a direct link between that practice and consumer prices."

The Court said that to count as illegal anti-competitive behaviour, the companies' acts only needed to have the capability of harming competition; that there did not need to be proof of anti-competitive effects. "An exchange of information between competitors is tainted with an anti-competitive object if the exchange is capable of removing uncertainties concerning the intended conduct of the participating undertakings," it said.

The Court was also asked to rule on whether it should be assumed that any company still in business after a meeting of competitors was using information gleaned from that meeting.

ECJ cases have said that it should be presumed that a causal relationship exists between the meeting and the companies' behaviour after it, unless evidence to the contrary is shown. Dutch law has different provisions relating to evidence in such cases.

The mobile networks argued that the ECJ rulings were about procedure, rather than the core EU law, and therefore were not binding on EU member states. The ECJ disagreed, though, and said that the presumption was binding.

Alan Davis, a competition law expert at Pinsent Masons, the law firm behind OUT-LAW.COM, said that companies did not even need to meet once to get into trouble over competition concerns.

"It doesn't matter that this was just a single meeting – in fact it didn't have to be a meeting at all," he said. "If there was just an exchange of information the OFT [Office of Fair Trading] or the Competition Appeals Tribunal could look at that as leading to a concerted practice."

Davis said that the Competition Appeals Tribunal has previously ruled that just being at a meeting at which price-fixing was agreed would be enough to be an offence. JJB Sports had argued that it had not participated in the discussion but had been at a meeting when price fixing was discussed. It later withdrew from the unlawful arrangement. It said that it had not broken the law, but the CAT disagreed.

"It is thus plain that an undertaking may be passively party to an infringement of the … prohibition," said the CAT ruling. "That is so, in particular, where it has taken part in a meeting or other contacts, and has done nothing to distance itself from the matters discussed. In those circumstances the undertaking is taken to have tacitly approved of the unlawful initiative, unless it has publicly distanced itself or informed the OFT. In our view that principle is extremely important as far as the enforcement of the Act is concerned."

Davis said that there were many situations in which employees of a company could find themselves suddenly presented with information that it would be illegal to act on. He said that he advises people on how to deal with such situations.

"If you are at a trade association meeting, for example, and are sitting down with your competitors and something comes up which should not be discussed, like price or bid rigging, then you need to stand up and say that this should not be discussed," he said. "If that doesn't work, you need to leave the meeting and ask for it to be minuted that you did and why."

"Then you should go back to your office and write a note of what happened and at what point in the meeting you left," said Davis. "When a competitor does give another company information I have seen companies write letters saying that it was unacceptable and they are a competition law-compliant company and they will not be acting on the information."

"You really do have to actively distance yourself from the information, even if you were just a passive recipient of it," he said.

The ruling can be read here (pdf).

Copyright © 2009, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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