Two recent decisions of the Croatian Competition Agency demonstrate that it is improving its track record in competition law enforcement. The first concerned a cartel of seven providers of personal protection services; the second concerned a cartel of nine providers of marina berth and mooring services. Both cases generated professional and public interest, and the marina cartel proceeding is likely to prove a landmark case.

Facts

The proceeding was instigated following a private initiative (eg, competitors or customers), which implies that the agency had information about potential irregularities or at least that it was thoroughly informed about the market situation. The agency discovered that representatives of marina operating companies who had participated in an October 2012 meeting of the Croatian Marina Association (operating under the umbrella of the Croatian Chamber of Economy) had exchanged information on future pricing policies for berthing services.

It was further established that the participants in the meeting had announced that they would not raise the prices of their services in 2013, but instead that "those who would eventually raise their prices, would go with a minimal price increase (to reflect the percentage of inflation in the Republic of Croatia)". In addition, the agency established that in March 2013 the participants again discussed berth prices.(1)

The exchange of information on future prices and disposal of such strategic information were deemed sufficient for the agency to render a statement of objections, thereby demonstrating its serious intention to adopt a final decision on the existence of a cartel.

Noteworthy defences

The agency did not establish the existence of an explicit agreement on the price increase between the participants in the meeting, but concluded that strategic information on future pricing had been exchanged. However, the defendants presented a range of counterarguments questioning the allegations as well as the concept of the forbidden exchange of information in this context, the most important being the following:(2)

  • No formal exchange of information had taken place. However, a newly employed secretary had incorrectly recorded the discussion after the meeting, which was part of informal talks anyway;(3)
  • The true content of the meeting was not conveyed by the minutes. In fact, future price behaviour had not been discussed;
  • The drawing up of a budget for a particular undertaking had already been completed at that point. Logically, therefore, the arrangement (ie, the price alignment) could not have been executed as described by the agency; and
  • The prices that were later put into force did not support the thesis that there had been coordinated behaviour.

The defendants further argued as follows:

  • Even if such a statement with respect to future behaviour had been reached, it would not have led to harmonisation in the market because the services were so complex that they could not be harmonised or compared;
  • Hypothetical statements that prices would not increase actually favoured final customers;
  • It was possible that the marinas were not even competitors, considering that some of them were located in different regions; and
  • The agency had failed to define the relevant market and therefore assessing possible adverse effects was impossible.

Decision

The agency rejected all arguments, concluding that the minutes proved beyond doubt that the participants in the meeting had exchanged information about the future prices of their services.

In addition, the agency stated that information exchange regarding future prices is a restriction of competition by object. Thus, there was no need to determine the anti-competitive effects of such conduct.

Regarding the defendants' claims that the agency should have considered the specific characteristics of the market and the information exchanged, the agency pointed out that an analysis of adverse effects was not required. Only in cases in which no restriction by object can be established is it necessary to assess whether the exchange in question resulted in a restriction of competition.

The agency also stated that the existence of an explicit agreement between the defendants on raising the prices of berths by a specific amount was not determined – nor was the proceeding initiated for that purpose. This particular proceeding was conducted regarding only the exchange of information on future berth prices that could have led to coordinated behaviour between the parties. That exchange included the announcement that prices would not be increased or would be increased minimally in line with inflation. Consequently, the agency established that for a prohibited agreement to exist, it was not necessary for all parties to raise their berth prices in the same amount and in the same manner.(4)

Comment

Companies and legal practitioners alike should not be misled by the fact that the decision imposed only moderate fines against operators in a niche industry. Assuming that it is confirmed on appeal by the High Administrative Court, the decision's legal impact will likely be significant, for the following reasons:

  • For the first time, the agency deployed a detailed concept of information sharing, defining it as follows:

"when an undertaking reveals to its competitors strategic information concerning its future pricing plans, in this particular case rates and charges for berthing, and even in the absence of an explicit agreement to raise prices, it reduces strategic uncertainty as to the future operation of all the competitors involved and increases the risk of limiting competition and of collusive behaviour. In other words, this is why such a practice involving the exchange of individual data about intended future pricing policy constitutes a hard core restriction".

  • The agency has confirmed that other principles enshrined in EU competition law are also applied in national cases, warning possible infringers that taking a passive role in a meeting with a collusive agenda is unacceptable. This means that when a company representative participates in a meeting at which strategic information is exchanged and receives such strategic data from a competitor, the representative must clearly state that the company does not wish to receive such data and immediately leave the meeting. Otherwise, the company will be presumed to have accepted the information and adapted its market conduct accordingly.
  • The agency has ambiguously claimed that ''it does not state that the exchange of information on current and previously publicly announced prices is prohibited'', without giving a detailed explanation of such conclusion or additional criteria on permissible conduct.

The outcome of the appeal is awaited with interest. One way or another, the agency will continue on its path towards strict competition law enforcement. Further antitrust investigations have reportedly been instigated. It is only a matter of time before the agency targets Croatia's major industries, which have been subject to antitrust scrutiny in other EU member states. By the same token, it seems inevitable that the agency will follow the example of other national competition authorities and start imposing higher fines.

For further information on this topic please contact Mislav Bradvica attorney at law in cooperation with Schoenherr by telephone (+385 1 4813 244) or email (m.bradvica@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

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