Tacit Collusion & Collective Dominance Angeliki Kanellopoulou Attorney-at-Law, LL.M. International Conference The Reform of EC and Greek Competition Law Athens, 1 -2 June 2007

2 Similar Behaviour Collusion: Conscious similar behaviour intended to eliminate competition whether : Explicitly or Tacitly Tacit Coordination Similar behaviour not intended to eliminate competition

3 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

4 Article 81 – Concerted Practice 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)

5 Tacit Coordination Oligopolistic independence as a form of concerted practice under Article 81(1) ?? Clearly no! Clearly no!

6 Article 82 – Collective Dominance 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: Only Oligopolistic Interdependence ????

7 Merger Control Airtours v Commission CFI: economic links include the relationship of interdependence between oligopolists Criteria 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

8 Merger Control Airtours 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”

9 Merger Control Airtours / 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”

10 Tacit Coordination Oligopolistic interdependence as a form of collective dominance under the Merger Control Regulation ?? Not clarified by Airtours judgment

11 Article 82 CMB v Commission, Taca v Commission, Lauren Piau v Commission The 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 !

12 Tacit Coordination Oligopolistic interdependence as a form of collective dominance under Article 82 ?? Not unless there are structural or economic links! Not unless there are structural or economic links!

13 DG Competition discussion paper on 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

14 DG Competition discussion paper on 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

15 DG Competition discussion paper on Article 82 reform Airtours merger criteria not sufficient for Art. 82 Potential for collusion should not be enough

16 DG Competition discussion paper on 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

17 DG Competition discussion paper on 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 & Collective Dominance Angeliki Kanellopoulou Attorney-at-Law, LL.M. International Conference The Reform of EC and Greek Competition Law Athens, 1 -2 June 2007

20 Merger Control Gencor 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”

21 Article 82 CMB 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

22 Article 82 TACA 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!

23 Article 82 Lauren 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!

24 DG Competition discussion paper on 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”.

25 DG Competition discussion paper on 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