Kafkaesque nightmare or EU Court judgment?
E-Turas offers its travel tour reservation system to 30 travel agents in Lithuania. Travel agents integrated the E-Turas system into their websites.
On 27 August 2009, a system notice appeared in the ‘Information Notices’ field of the E-Turas system:
We will enable online discounts in the range of 0% to 3%, to be chosen individually ... For travel agencies which offered discounts in excess of 3%, these will automatically be ... reduced to 3% ...
On the same day, E-Turas implemented a 3% discount restriction.
Tours make up for just a tiny portion - as little as 0.15% - of travel agents' sales. The travel agents said they paid little or no attention to the E-Turas service and certainly not its admin messages.
The Lithuanian authorities imposed €1.5 million in fines, claiming that by this message, all 30 travel agents formed a price-fixing cartel to limit discounts to 3%. The EU Court agreed. Sending the message followed by the discount restriction implementation gave rise to a presumption that the travel agents were engaging in cartel practice.
Competition law rules take no prisoners
As the case shows, EU competition law on contacts between competitors is extremely strict. Sharing any sensitive information with competitors - such as future price or sales intentions - can be treated as cartel-type conduct and attracts multi-million euro fines. The same rule applies even where the exchange is initiated or facilitated by a third party such as an online platform administrator.
Administrators of any auction or market place site could potentially create the same liabilities for its members, albeit inadvertently, when it communicates new commercial policies. Care needs to be taken with IT functions that control pricing elements, in particular where IT functions are shared across all participants in a platform, including with competitors.
The law is not absolute, but defences are very strict. It would be necessary to show that a participant responded to the administrator saying that it refused to comply with the message, or to report the matter to the authorities. It might also be possible to show that, as a matter of practice, the participant systematically acted contrary to the communication (for example, by aggressive discounting). But this will be very difficult to prove. So the best defence is to be alert for problem messages.
Know how far you can go
It is legal in communications with platforms:
- To send or receive messages from the platform that relate only to your company and are not shared with other platform vendors/users. These types of communication, for example, around promoting or pricing your company's products will not raise concerns, provided it does not involve illegal resale price fixing or territorial restrictions.
- To receive administrator messages, even when these are sent to all participating vendors, on technical matters without any commercially sensitive content (e.g., platform upgrades, downtime, display changes, new functionality). Provided these do not touch your company's commercial proposition (e.g., sales, prices, promotions, customers), then these will not raise any concerns.
Know the risks
It is likely to be high risk to receive messages sent by the platform's administrator to all vendors which relate to:
- prices or elements of pricing policy (e.g., "Our new pricing tool does not allow prices to deviate by more than 10% of our recommended prices for each currency.");
- discount levels (e.g., "We just released the sale approval tool for you to submit winter sales discounts. This tool allows you to submit discounts up to 5%");
- promotional terms and conditions (e.g., "Products put for sale on the platform less than 6 months ago may not form part of a promotional bundle.");
- limiting your company's commercial freedom in any way (e.g., as to prices, customers, sales or promotions); and
- describing any individual vendor's commercial activity (e.g., as to prices, customers sales or promotions).
Get legal involved
In the event that you do receive a high risk message:
- Don't panic or delete the email - that will just exacerbate the problem.
- Contact Legal. They will help you respond and defuse the situation by, for example, drafting a suitable reply or taking other steps to document that you disagree with the message's contents.
- Tell Legal when you receive the message. If you only read the message at a much later date, it may be necessary to take steps to explain to the administrator when you first learned of the message and that you took steps to distance yourself from its contents.
- Do not engage in any discussions as to the contents of the message with its sender or any other recipients.
Platform Diligence and Compliance T&CS
If you are involved in various e-commerce platforms that potentially pose compliance risks:
- Check whether they have compliance rules or policies about administrator communications. Reputable sites should actively consider this compliance step.
- Get legal to help. If a site engages in risky behaviour or seems unaware of the risk, get legal involved to raise the compliance risks with the site.
- Consider the cost-benefit of participation. Remember, the E-Turas tours represented merely 0.15% of travel agents' revenues in Lithuania but attracted a fine of €1.5 million.