Tacit Collusion & Tacit Collusion & Collective DominanceCollective Dominance

Angeliki KanellopoulouAngeliki KanellopoulouAttorney-at-Law, LL.M.Attorney-at-Law, LL.M.

International ConferenceInternational ConferenceThe Reform of EC and Greek Competition LawThe Reform of EC and Greek Competition Law

Athens, 1 -2 June 2007Athens, 1 -2 June 2007

22

Similar BehaviourSimilar Behaviour

Collusion:Collusion:

Conscious similar behaviour intended to eliminate competition whether :

Explicitly orTacitly

Tacit CoordinationTacit Coordination

Similar behaviour not intended to eliminate competition

33

Tacit Coordination Tacit Coordination

Especially in tight oligopolies & highly concentrated markets

Oligopolistic interdependence Undertakings are aware that their behaviour affects and is affected by the behaviour of their competitors Leads to similar behaviour

Collusive v Competitive oligopolies

44

Article 81 – Concerted Article 81 – Concerted PracticePractice

Parallel behaviour must not be confused with concerted practice (ECJ: ICI v Commission)

Firms must be allowed the right to intelligently adopt themselves to existing or expected behaviour of the competitors (ECJ: Suiker Unie v Commission)

Oligopolistic interdependence does not constitute concerted practice (ECJ: Suiker Unie v Commission)

When similar behaviour is due to the structure of the market it does not fall under 81(1) (ECJ: Woodpulp II)

55

Tacit CoordinationTacit Coordination

Oligopolistic independence as a form Oligopolistic independence as a form of concerted practice under of concerted practice under Article Article 81(1)81(1) ?? ??

Clearly no!Clearly no!

66

Article 82 – Collective Article 82 – Collective DominanceDominance

Early View:Early View: Structural links Shareholdings Personal links interlocking directorates Joint ventures Network interconnection

Subsequent Position: Subsequent Position: Economic links are sufficient Horizontal cooperation agreements Vertical supply agreements Distributorships Strategic alliances Systematic exchange of information

After Merger Control developments:After Merger Control developments: Only Oligopolistic Interdependence ????

77

Merger ControlMerger ControlAirtours v CommissionAirtours v Commission

CFI: economic links include the relationship of CFI: economic links include the relationship of interdependence between oligopolists interdependence between oligopolists

Criteria for finding collective dominanceCriteria for finding collective dominance

Market transparency: each member of the oligopoly must have the ability to be aware, sufficiently, precisely and quickly, of the other members’ conduct in order to monitor whether or not they are applying the common policy

Retaliation possibilities: each member must be aware that they are adequate deterrents to ensure sustainability of tacit coordination over time, operating as long-term incentive in not departing from the common policy

Absence of external constraints:the foreseeable reaction of current and future competitors as well as of consumers will not jeopardize the results expected from the common policy

88

Merger ControlMerger ControlAirtours v CommissionAirtours v Commission

CFI: Collective action

“in view of the actual characteristics on the relevant market and the alteration of its structure that the merger would entail, the latter would make each member of the dominant oligopoly, as it becomes aware of common interests, consider it possible, economically rational and hence preferable to adopt on a lasting basis a common policy on the market with the aim of selling above competitive prices, without having to enter into an agreement or resort to concerted practice within the meaning of 81(1) and without any actual or potential competitors, let alone customers or consumers being able to react effectively”

99

Merger ControlMerger ControlAirtours / First ChoiceAirtours / First Choice

Commission: Independent action by oligopolists

“[it ] is not a necessary condition of collective dominance for the oligopolists always to behave as if there were one or more explicit agreements (…) between them. It is sufficient that the merger makes it rational for the oligopolists, in adapting themselves to the market conditions, to act independently in ways which will substantially reduce competition between them, and as a result of which they may act, to an appreciable extent, independently of competitors, customers and consumers”

1010

Tacit CoordinationTacit Coordination

Oligopolistic interdependence as a Oligopolistic interdependence as a form of collective dominance under form of collective dominance under the the Merger Control RegulationMerger Control Regulation ?? ??

Not clarified by Airtours judgment

1111

Article 82Article 82CMB v Commission, Taca v CMB v Commission, Taca v Commission, Lauren Piau v Commission, Lauren Piau v

CommissionCommissionThe finding of a collective dominant position is based on an economic assessment especially of the structure of the market

Collective dominance established on the basis of factors of economic correlation enabling the members of the oligopoly to adopt the same line of action in the market

“Two or more undertakings legally independent of each other must be linked in such a way that the adopt the same conduct on the market, thereby presenting themselves or acting together as a collective entity vis-à-vis their competitors, trading partners and consumers”

BUT: in fact there were strong structural and legal links !

1212

Tacit CoordinationTacit Coordination

Oligopolistic interdependence as a form Oligopolistic interdependence as a form of collective dominance under of collective dominance under Article Article 8282 ?? ??

Not unless there are structural or economic Not unless there are structural or economic links!links!

1313

DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

“the structure of the market and the way in which undertakings interact on the market may give rise to a finding of collective dominance”

Undertakings in oligopolistic markets “may by able to coordinate their behaviour on the market by observing and reacting to each other’s behaviour. In other words, they may be able to adopt a common strategy that allows them to present themselves or act together as a collective entity”

Ability to coordinate depends on the 3 Airtours criteria

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DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

Includes independent similar behaviour

Goes beyond even Airtours

Limits the ability to “intelligently adopt” [see Suiker Unie]

May apply even in a competitive market

1515

DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

Airtours merger criteria not sufficient for Art. 82

Potential for collusion should not be enough

1616

DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

No legal safety for companies

In depth economic analysis required

No safe harbours from market share thresholds

Disturbing CFI’s obiter dictum in Impala v Commission: indirect evidence of existing collective dominance

1717

DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

Actual finding of long standing common policy meeting the 3 Airtours criteria falls under 81(1):

“common policy”

monitored by participants

maintained over a long period of time

punished when deviated

eliminating competition between participants

Tacit Collusion & Tacit Collusion & Collective DominanceCollective Dominance

Angeliki KanellopoulouAngeliki KanellopoulouAttorney-at-Law, LL.M.Attorney-at-Law, LL.M.

International ConferenceInternational ConferenceThe Reform of EC and Greek Competition LawThe Reform of EC and Greek Competition Law

Athens, 1 -2 June 2007Athens, 1 -2 June 2007

2020

Merger ControlMerger Control Gencor Ltd v CommissionGencor Ltd v Commission

CFI: Structural links are not necessary.

““Economic links include the relationship or interdependence existing between the parties to a tight oligopoly whining which, in a market with appropriate characteristics (in particular in terms of market concentration, transparency and product homogeneity) those parties are in a position to anticipate one another’ behaviour and are therefore strongly encouraged to align their conduct in the market, in particular in such a way as to maximize their joint profits by restricting production with a view to increasing prices””

2121

Article 82Article 82CMB v CommissionCMB v Commission

CFI: The finding of a collective dominant position is based on an economic assessment especially of the structure of the market

“Two or more undertakings legally independent of each other must be linked in such a way that the adopt the same conduct on the market, thereby presenting themselves or acting together as a collective entity vis-à-vis their competitors, trading partners and consumers”

BUT: members of maritime association

2222

Article 82Article 82TACA v CommissionTACA v Commission

CFI: Collective dominance on the basis of factors of economic correlation enabling the members of the oligopoly to adopt the same line of action in the market.

“the continued existence of a possible degree of competition between the parties does not rule out the finding of a collective dominant position”

BUT: maritime association!

2323

Article 82Article 82Lauren Piau v CommissionLauren Piau v Commission

CFI:

“Because the regulations are binding for national associations that are members of FIFA and the clubs forming them, these bodies appear to be linked in the long term as to their conduct by rules that they accept and that other actors (players and players’ agents) cannot break on pain of sanctions that may lead to their exclusion from the market, in particular in the case of players’ agents. Within the meaning of the case-law cited in paragraphs 110 and 111 above, such a situation therefore characterises a collective dominant position for clubs on the market for the provision of players’ agents’ services, since, through the rules to which they adhere, the clubs lay down the conditions under which the services in question are provided”

BUT: linked by the FIFA membership rules!

2424

DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

No legal safety for companies

CFI’s obiter dictum in Impala v Commission

“The 3 Airtours conditions may be established indirectly on the basis of very mixed series of indicia and items of evidence relating to the signs, manifestations and phenomena inherent in the presence of collective dominance. Close alignment of prices over a long period (especially if above competitive levels) together with other factors typical of a collective dominant position might, in absence of an alternative reasonable explanation, suffice to demonstrate the existence of a collective dominant position, even where there is no firm direct evidence of strong market transparency as such transparency may be presumed in such circumstances”.

2525

DG Competition discussion paper DG Competition discussion paper on Article 82 reformon Article 82 reform

In any case, no room for exclusionary abuse

If independently by some no common policy

If simultaneously by all competitive market

If by all but with explicit/tacit collusion Art. 81(1) violation