Greyhounds, swans, alcoholmeters and European Antitrust Law

Adam Smith wrote in the Wealth of Nations that “two greyhounds, in running down the same hare, have sometimes the appearance of acting in some sort of concert.  Each turns her towards his companion, or endeavours to intercept her when his companion turns her towards himself.  This, however, is not the effect of any contract, but of the accidental concurrence of their passions in the same object at that particular time”.

With this example the great economist taught us that oftentimes appearances are misleading and it would be foolish to attempt to find a concurrence of wills where there is simply chance, survival instinct or adaptation to the prevailing circumstances.

A European national antitrust authority, when condemning a parallel increase in price of several newspapers, stated: “such a harmonious behaviour cannot be explained as an independent reaction to market conditions, due to the large number and differing characteristics of market players as well as the variety of options theoretically opened to them. In the same vein that it would not be credible to sustain that the harmonious performance of the Swan Lake by a ballet ensemble is the result of the individual inspiration of each performer”.

Intelligent adaptation to prevailing market conditions should not be confused with anticompetitive concerted behaviour.  However, when the market behaviour of two competitors is analogous, how can anyone decide whether it is the result of their individual business survival instinct or the result of anticompetitive concertation?

The answer given by European antitrust law is the use of “legal presumptions” or the “reversal of the burden of proof”.  Accordingly, it is for the affected companies, and not for the accusing authority, to reverse the legal presumption of a concerted practice between them.  The European Court of Justice in a recent judgment (Case C-8/08, T-Mobile) confirmed that one single meeting amongst competitors where one of them commits the “indiscretion” of revealing that it intends to lower the commissions it pays to its resellers, suffices to condemn all those present at the meeting for concerting their market behaviour.  The reason being that the competitors, although passive recipients of that information, were not able to reverse the legal presumption that such information influenced their subsequent behaviour in the market.  In other words, they also lowered the commissions payable to their resellers but were not able to provide an alternative explanation to their alignment with their competitor’s indiscretion. 

The judgment in T-Mobile is also interesting because such a concerted practice is condemned as a per se violation.  Interestingly, the law treats per se antitrust violations in a similar fashion to drunk driving.  Regardless of whether the drunk driver caused an accident or actually created any risk while driving, most legal orders condemn the driver when the alcohol content in their blood or saliva exceeds a certain level.  The risk of an accident is so probable that the law presumes it as actual.  In my course on Competition Law at the College of Europe, I always compared per se antitrust violations to drunk driving.  I found it interesting to read the Opinion of Advocate General Juliane Kokott in T-Mobile where she also uses this comparison.  Unfortunately, in antitrust law we have no alcoholmeters to determine with full precision when such a set of ambiguous and imprecise rules have been infringed.  Professor Herbert Hovenkamp in his outstanding book “The Antitrust Enterprise” said “The rules of antitrust remain unfocused, insufficiently precise and excessively complex. The problem of poorly designed rules is severe, because in the short run rules weigh much more heavily than principles”.

Companies often complain about the unpredictability of antitrust laws and the uncertainty this creates when deciding their market strategy.  Here is my alcoholmeter to assist you to identify and avoid the accusation of infringing this area of EC competition law.  In oligopolistic sectors one single instance where competitively sensitive information is revealed is enough to presume a breach of the law.  It is for the recipients to prove that such information did not influence their subsequent market behaviour.  Diligent business managers must adopt safeguards so that the future commercial behaviour of their company is not revealed under any circumstances.  Adequate antitrust training of relevant employees is key.  If, despite these measures, an illegal exchange of information takes place, companies should ensure a swift and clear response: 

  • the company should unequivocally distance itself from the exchange of information (if possible during the meeting)

  • everything should be done to limit the spread of the exchanged information internally and ensure that the information cannot be taken into account in future business conduct

  • an application for leniency before the European Commission or the relevant national competition authority(ies) should be carefully considered.